Understanding Option Chain

Startup – 5 Critical Factors for Your Success

A startup is the new buzzword of the town. With the focus of govt on startup India, a new breed of entrepreneurs is preparing for the second innings. When i shared a post on startup failure, the readers of this blog requested to share a post on critical success factors :). As i mentioned in previous posts that unfortunately no one will share the cocktail of success. You have to create your own :). When i was planning a startup, i did some research on success factors of startup. I was fed up with the management gyaan of hard work, perseverance, persistence, conviction blah blah…The entrepreneurs who failed did not lack on any of these factors. I can share numerous examples. These are basic requirements for any entrepreneur. I was looking for something more meaningful.

As i mentioned that entrepreneurs do not share reasons for failure and the same is true for success also. After wasting few weeks, i decided to study on my own the success stories. As you know that there is no perfect crime. Similarly, how much a successful entrepreneur tries but he cannot hide the success factors. You only need eagle’s eye to identify the same. After burning midnight oil, i figure out five critical success factors for any startup. As an entrepreneur, you are all alone in your journey. People will join you in your journey towards success. Let’s check what are these factors and why they are important.

Startup – 5 Critical Factors for Your Success

1. Two or more founders:

Barring handful exceptions, i observed that successful startup has two or more founders. Some of the examples are Flipkart, Shopclues, Snapdeal, Ola Cabs, Zomato etc. The only exception is Paytm that does not have any co-founder. The best part is that co-founders compliment each other very well in skill sets. Many people are under the impression that Flipkart was founded by Sachin Bansal because he is the only face of the company. It is not true. Therefore, it is important that co-founders should compliment each other and focus on their strengths. The probability of success is high in such cases.

2. Flexibility:

The biggest problem with a startup is to find a perfect business model to start with. Yesterday, on one of my WhatsApp startup group, one of the member commented that she could not find a right business model from last 3 years. In my business school, i studied business plans, marketing plans etc. Till date, no one succeeded based on theoretical learning’s. It is important for foundation stone but flexibility is the key & life teaches its own lessons. Some of the successful startups turned their business model upside down and became successful. In short, they started with the not so perfect business model. They learned their lessons and had shown a great degree of flexibility.

Not many people are aware that the parent company of Paytm is One97 communications. It was originally a Value Added Service provider to telecom operators. Once the founder realized that there is not much scope, he completely changed the business model. Similarly, Flipkart started as an online bookstore. Snapdeal used to offer discount coupons. I still remember yamdoot advertisement of Snapdeal in 2011. I shared the same in my historical post, the future of e-commerce in India. It was all about deals. They changed their business model to the marketplace after suffering reverses.

3. Scale up plan:

All the successful startup’s were launched at small scale. Recently, one of my friends launched a startup only in Bangalore city. The companies that tried to scale up fast usually fail. I included this point as one of the major reasons for failure. On the contrary, a well thought through scale up plan can be a critical success factor. The objective is to keep the cost under control and also manage the operations well.

The best example, i can think of is bigbasket. They started from Bangalore and are gradually and slowly expanding in new cities. It also gives them learning curve for new launches i.e. to take care of past mistakes.

4. How to utilize funding?

The biggest dilemma for any startup is how to utilize the funding? Some of the options are to expand in new geographies, invest in technology, burn cash to gain more customers etc. The companies that used funding only in single focus area failed miserably. The successful companies brainstormed and used funding intelligently. It can be a mix of factors depending on the nature of the business. For example, ecommerce players are utilizing funding for logistics, adding new suppliers, technology, and a portion for offering discounts.

It’s a myth that just based on the discounts or high cash burn rate, you can be successful. I am not saying, it is not required but what matters is overall customer experience. High cash burn rate can only give initial traction. The key reason for the failure of food ordering apps is that they utilized almost entire funding for discounts. The loyalty comes from experience. I personally availed huge discounts but the overall experience was not so good. The food ordering app failed to keep a check on quantity, quality, logistics, and overall customer experience.

5. What Next?

It is very difficult to say whether you are moving continuously, therefore, you are successful or you are successful therefore moving continuously. Recently, Amazon announced it’s launch in the grocery business. Paytm a VAS provider and then a mobile wallet now received payment bank license. Some of the founders of successful startup’s like flipkart & snapdeal are investing in a new startup to hedge their future risk. Few others are taking acquisition route like Ola Cabs acquired TaxiForSure. There is NO Right or Wrong strategy. The objective is to answer What Next?. In management terms, it is also called vision. In my opinion, founders who invest in other companies are foreseeing a possible future slowdown.

The suitable case study, i can think of is JustDial. It was one of the best startup and most promising company. Celebrity like Amitabh Bachchan invested in the company. The company failed to answer What Next?. It lost the momentum midway and is now struggling for survival.

Words of Wisdom: Although there is NO perfect recipe for success. In India, the startup ecosystem lacks knowledge sharing platform. One of the reasons can be that there is no space for all. In each domain, only 2-3 startups can succeed. The consolidation is unavoidable. This fact is known to everyone but a new breed of entrepreneurs are quite optimistic that they will be acquired by the some big player. Therefore, they try to create a niche for themselves. At the end of the day, it is a matter of survival of the fittest. I have not mentioned in my post but first mover advantage, increase the probability of success. If you are planning to start something new then it means concept should be “New”. Otherwise in literal terms, each and every new business is a startup. Last but not the least, before jumping the bandwagon, you should find out the 5 reasons for your future success. Wishing you all the success in life :).

Copyright © Nitin Bhatia. All Rights Reserved.

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