Common problems startups face – A Design thinking outlook
I have been directly associated with startups since 2006. That’s when I started my career as a member of a venture capital investment team. All the way to my recent years consulting them and young businesses, I have heard a multitude of problems that startups face. Problems that can largely be categorized under two main causes.
The first one of course, being investments.
The second, being the lack of traction, or growth in business.
With regard the problem of funds, you could further break it up in to funds you must have, and funds that are good to have.
Literally all of us are, more often than not, influenced by awe-inspiring startup stories. About those startups in the world that seem to be on a blistering growth path. With people and funds literally queuing up for an opportunity to invest in them.
Watched the movie ‘The Incredible Hulk’? The Hulk and the Abomination in that are like those few startups that receive disproportionately high amounts of funding.
Everyone is not like them. And even in their case, of the two, only Hulk was relatively stable with the superpower. The Abomination, as the name goes, became that way because of his lust for super-strength to beat the Hulk.
Similarly, even if all startups could be funded like that, or like Uber and PayTM and Zomato and others have been, there is no guarantee they will succeed. Because making a business stable takes managing a lot more variables than merely the investment one.
Which brings us back to the other alternative – funds you must have.
This is the basic minimum investment that you would need to get your startup rolling. It isn’t too tough to calculate it. Just make sure you have sufficient buffer. And keep checking those levels so you don’t realize it’s bad only once you’re broke. The advantage of this mindset, is that even if external investments never come, your startup will be built on a solid foundation and a sound business model. That, as opposed to one of hyper-experimenting, as is sometimes the case with super-funded startups. Take the case of TinyOwl hiring and almost immediately firing hundreds of enthusiastic freshers back in the day. Or Ola paying USD 31.7 million for FoodPanda a year and a half ago, only to fire a lot of the staff and suspend its operations recently.
While such news pieces might be good to hear, they are often not something to be proud of.
A bootstrapped startup will have its share of proud moments too. And they will be far more grounded and not the kind that could be easily taken away, unlike the case with some over-funded ventures.
Now let’s look at the other main problem area of startups. The lack of traction or growth.
In my book, Design the Future, I mention what is to me, a wonderful example from both an investment angle and a strategic one that depended solely on the understanding of customer needs.
One portfolio company whose growth my boss and I used to oversee, was in the car rental space. Around 2009, it was on its way to be the largest player in India, right on the heels of Meru. Meru was then leading the pack in terms of size of fleet.
However, what was interesting, was that Meru’s business had been built largely on debt. Ours had been built on equity. Which meant we were profitable sooner, and could scale much faster. Meru had just turned profitable around 2009-10, if I remember correctly.
And back then, our portfolio company was already onto the model of partnered fleet. That is what Uber is all about now. Our company was collaborating with small tourist vehicle operators to add their fleet and drivers to their own, in a revenue-sharing model.
Now think about this. A company founded in 2006, which was already employing a model that we in recent times popularly know of as Uber, what as of today, has a market capitalization of USD 69 Billion! And Uber was founded only in March of 2009 (conceptualized in 2008).
So what prevented our portfolio company from being the one valued at USD 69 billion?
In hindsight, a lack of better understanding of the stakeholders in the ecosystem, is my guess.
Our portfolio company and other players back then were perhaps used to a certain customer price level and profitability that they enjoyed in a tried-and-tested pan-India market.
However, perhaps we failed to see that we could considerably reduce the margins and incentivize the partner ecosystem, in an effort to gain massive scale.
And with customers, it is only in very select areas that if we offer something at a lower price, they won’t take it. But certainly not with transport.
So, Uber carpeted several countries with the initial attractive pricing, and more than encouraging partner revenue-sharing and incentives.
And companies like ours, that didn’t think huge enough, shrunk into insignificance in that particular space at least, which they had ruled for some years till then.
Putting investments and a better understanding of the stakeholder ecosystem together, it is not necessary that every business and every idea has to be Uber-sized!
You can as well remain small, exclusive and yet thriving in a small or select few areas or geographies, if that is your business vision. Or, as is the case with Uber, you can be the most recognized brand in ground transport.
What is most important, is to first decide where on that spectrum you want to be. Then you need to find out (not in meeting rooms, but by spending time with stakeholders), what their likes and dislikes are. What drives them, what their profit expectations are? And how flexible are they on pricing; or, is there a better way you can offer them what you do? Something that might completely be poles apart from how you offer it right now.
Scenarios in the startup ecosystem are limitless. And so are the possibilities.
Originally written for NODD app and posted here: link
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The Entrepreneur in a Venture Capital World
Imagine a food connoisseur has a vision of opening a restaurant. Selling a carefully crafted list of delicacies, whose preparation has taken years to refine. This aficionado has thought of everything. The cutlery that would highlight the preparations, what the entrance to the restaurant would be like, the kind of chefs he or should would need. Everything.
Now imagine, you, as a customer, visit that restaurant. No guarantees you’ll like the food there. Or you might have preferred a better selection on the food menu. Now let’s say you, and your friends or family who have accompanied you, get to have a say in what the menu should be. Just because you’ll be paying the bill. Or simply because a local bank or relative bankrolled the entrepreneur’s dreams, they want to have a say in what food should be served.
Isn’t this the case with the venture capital investment ecosystem? They take a seemingly great idea, imagined by a dreamer. And after some funding, in an urge to “scale” it, they put it on steroids. Often at the cost of the original dream and vision. And with the VC community, their return timelines are shrinking, so their portfolio mutation is growing rapidly. They don’t care about profits. As long as there is sufficient sales and buzz, they’re on track. As opposed to keeping fund and investment choices a little more practical. So as to build a more, bottom-heavy business. On a steady foundation.
In a way, it would compare with a risk in the investment ecosystem called Maturity Mismatch Risk. This is a capital management situation that can disrupt business cash flows. It’s seen when assets held to meet future liabilities are not well aligned from a maturity time point of view. Short term assets should deployed for projects with quick returns. Otherwise, they could cause a financial crunch in the short term. ‘Entrepreneur-Investor’ relationship could be looked at in a similar way. Where an investor who is only there for a few years, sometimes changes the entrepreneurs long term strategy to suit their investment goals.
Now this might seem to contradict my VC related post from earlier this week. One where I said that the VC space seems to have more left-brained, finance, cold-numbers people, and less right-brained, creative ones who would appreciate a good, world-changing vision and back it up in a way that it really changes the world permanently. However, they are two sides of the same coin. Business models do take the world forward. But that doesn’t mean every other potential idea must first blow up with over-funding and investor control, and then explode! And all the while, the disinterested, minority stake-holding promoter is busy with other startups he or she has invested in.
Imagine a great idea and promoter being backed by an investor who actually sees the impact of the idea from the promoter’s perspective. That means, not just scaling an idea, but rather, letting it grow to have the impact it was intended to. Then maybe some of the great entrepreneurs wouldn’t actively shun investors and patiently bootstrap their way to world-change.
It isn’t just about the idea. The entrepreneur’s vision of how the idea pans out matters just as much.
I happened to see this post on LinkedIn when I was writing this post. While decisions like come on one end of the world-change spectrum, a lot of venture funded companies aspire to be on the other. In that they would like to achieve a strong global presence with the least marketing spend. And most importantly, make astronomical stakeholder returns. For the VC community, the ideal place lies somewhere between the two ends of this spectrum. Because in many cases, the entrepreneur sets out on a well-intentioned mission to fix a huge problem for a customer base.
Image source: link
Again, it isn’t just about the idea. The entrepreneur’s vision of how the idea pans out matters just as much.
The title image is that of a vulture. When I worked in the venture capital space, people sometimes referred to the community as ‘vulture capital’. Nowadays, looking at some investment decisions and entrepreneurs who focus more on personal investments rather than their own ventures, looks like vulture capital is contagious.
…The bike with a bamboo core!
What does it take for innovation to be possible? Simply, just the intention. You need to want it badly enough to make it possible.
I happened to see this online a long time ago. I am still in awe of it though. People in Ghana find themselves in unfavourable temperatures, with long distances to go, but with limited connectivity. But rather than endure, with some external help, they designed bicycles built with a bamboo frame. They could easily source the other parts, which were standard to regular bikes. This innovation however, helped build a bike at a fraction of the cost of the ones normally available.
And I’ve found that regular bikes these days, corrode easily, and require considerable maintenance. These bamboo bikes however, seem to be easier to maintain. They can also be built for different sizes and for different applications (carrier, etc.). A green, economical idea that addresses so many needs. In times of compulsive and impulsive purchases all over the world, this is just the kind of impressive and refreshing innovation the world needs.
Don’t miss the video at the end.
A standard bike: source
A bike with a carrier and a carrier support frame: source
You can read more about it here: link
Two decades ago, it used to take quite a while before global technology and content was even commonly talked about in India. Much longer before it was accessible or affordable to us.
Today, India is home to numerous foreign manufacturing plants that cater to global demand. It is also home to several global R&D facilities. And we as consumers, are at par with the world, quickly becoming aware of, and easily adopting global technology and content. Especially when it comes to smartphones and mobile apps launched universally in multiple languages.
And yet, we Indians don’t seem to aim too high when it comes to our own entrepreneurial dreams. A bulk of us follow tried-and-tested business ideas. We seem glaringly averse to radical innovation; only a few daring to think beyond what everyone else is. From ‘another’ eCommerce site to ‘another’ aggregator, most business ideas are mediocre at best. What’s worse, there is little focus on the actual and incremental value-add, or the differentiation that these businesses are aimed at creating.
Delightful customer experiences too, remain more a mechanical compulsion and less a natural and genuine concern. It is also probably why Amazon has edged past Flipkart. Because Amazon understood customer needs and experiences in a foreign country better than our own folks could. I believe one of the fatal flaws at Flipkart, was that the founders should have been busy understanding how their customers consumed the service. To figure out areas to improve and delight. Instead, they were taking in too much money and too busy investing in other startups before their startup itself had arrived. It’s easy to see through Binny Bansal’s justification philosophy of “because I look at it as giving back.” To draw a parallel from flight safety instructions, ‘you should always fix your own oxygen mask on before helping children, elders, or others needing assistance.’ Let’s just hope it is still not too late for Flipkart to turn around, as Sandeep Singhal of Nexus Venture Partners stated, a few months ago.
Information and technology in themselves keep us at par with the world. So what stops us from dreaming beyond them at what’s next? And what stops us from setting global benchmarks in genuine and consistent customer delight?
We need to start imagining beyond what is obvious. We need to start understanding more than what data and analytics tells us. We need to be more in touch with customer behaviour and needs. We need to innovate.
That is the only way we can ever come a step closer to being the best in the world.
(updated on 17 Jan. 2017)
“What makes America so much more entrepreneurial and innovative than India?” That question has been in my head for many years now.
Obvious recent contributions including Facebook, Tesla, and the immortal giants, Google, Amazon and Apple come first to mind. But the world we live in stands witness to enduring American inventions – the airplane, credit card, transistor, laser, the computer and internet; with hundreds of inventions in-between.
Firstly, contrary to popular belief, the US is not the most innovative country in the world. They ranked 5th in 2015’s Global Innovation Index by World Intellectual Property Organization (WIPO). Results by other bodies too put them in a similar ranking.
Two factors seem to distinguish them from the rest. They are perennially innovative across all fields of work. And, creativity and entrepreneurial spirit runs deep in the veins of its masses. For nearly two centuries, it has been one of the most fertile environments for creativity and innovation. This has resulted in the most brilliant minds from the world over to steadily gravitate to it. To Innovate. To Create.
YouTube (albeit American), is filled with the ingenious creations of their average people. Remote-controlled cars, planes, and numerous vehicles and even other unimaginable contraptions built by average individuals like you and me. What makes them impressive is that they aren’t built out of a kit, but using even scrap or materials found around the house. And their customer experience practices have delighted and inspired the world, and set global benchmarks.
So while we can brush-off some inventions as exceptions; what explains the creative and entrepreneurial spirit of the common American?
In my quest to find something that the average American might knowingly or otherwise be doing differently to induce this trait, I quickly concluded it had nothing to do with their super-sugar coated cereals or microwave dinners. 😀
Heredity too didn’t seem like the answer, given the large mix of world population that goes in and out of the US. So how do they maintain a consistent level of creativity even with the influx of foreigners? Is something happening in the background, that nurtures creativity levels?
‘What else are they doing, that subtly but consistently fuels creativity?’
I felt the answer might lie in the power of the right brain. We know the right brain is the seat of creativity. And which in turn controls, and is stimulated by, the left side of our body. So are Americans doing something differently, that might be stimulating innovation?
Left-handed people for one, have been known to have a higher probability of being more creative than right-handed ones. Quoting someone anonymous on Quora, “Lefties have a greater chance of being a genius- or having a high IQ. Researchers aren’t sure why, but those who are left handed seem to make up a disproportionately large part of those who are highly intelligent. For example, 20% of all Mensa members are left-handed.”
But they comprise only about 10% of the world population.
So, assuming a normal distribution of left and right handed people across the world, 10% Americans aren’t conclusive proof of their general creativity. Even if that 10% included the left-handed John D. Rockefeller, Henry Ford, Bob Dylan, Walt Disney, Bill Gates, Mark Zuckerberg, and Tina Fey. Because, for each of them, there have been other innovators, creative people and entrepreneurs who are right-handed. So while left-handedness might give one an edge, what explains its considerable prevalence in the other 90% too?
Still stuck on the right brain and the left side of the body, there seemed to be sufficient studies concluding that when right-handed people use their left-hand more, it tended to improve general creativity. To what degree, is a great topic for a debate at another time. But if using the left side more fuels creativity, is there something Americans do differently than Indians, that might help?
Then a possibility struck. Can their driving give them some edge in being more creative? As absurd as it might sound, read me out.
About 65% of the world population today, lives in countries that follow a right-hand traffic rule (i.e. where you drive on the right side of the road, and oncoming traffic moves on your left), as opposed to 35% in countries that follow a left-hand traffic rule. India, influenced by the British, follows a left-hand traffic rule.
Right-hand traffic countries tend to have left-hand-drive cars, and in turn, use their left hands more, especially for continuous adjustments of the steering wheel. Opportunity to rest the elbow on the side of the door makes that a preferred hand from comfort and proximity perspectives.
But that would mean that 65% of the world should on average, be at least slightly more creative than the others.
So then the only remaining variable would be –how many people in each of those countries drive regularly? That brought me to the vehicular density of countries. Here too, the US seems to have the edge (whether for the good or not). It has the 3rd highest motor vehicle density in the world; that’s 797 vehicles per 1000 people! The first two spots are taken by San Marino and Monaco. Both of whom seem irrelevant to our discussion, given that these city-states have populations under 40,000 people. This makes the US the largest nation with the highest vehicular density. Contributors are the lack of a developed public transport systems outside of major cities, and cheap fuel. This results in Americans driving cars for everything from buying groceries from nearby, to traveling to other cities and states.
So is it possible, that frequent use of the left-hand while driving, in a country with the highest motor vehicle density, contributes to their innovation and creativity in general?
Honestly, I don’t know the answer. I don’t know if driving of left-hand-drive cars is ‘the’, or even ‘a’ contributing factor at all, to explain their creativity, innovation or entrepreneurial spirit.
However, in the absence of other conclusive factors, doesn’t it beg another look? Perhaps autonomous cars will help observe change if any?
I’ll look forward to your views on this. Also, hit the ‘Follow’ button if you’d like to receive more such posts from time to time. You can also connect with me on Twitter.
Think A-Team: The Latest Services Menu for Startups
Late last year, I started a service called ‘Think A-Team’, to bring human-centered design strategy & other relevant services in a transparent manner to aspiring entrepreneurs & enterprising startups in India and abroad, to help them grow faster and better.
One of the key This has been possible by using available technology to considerably reduce everything from physical meetings, total execution time, and even paper (except Post-it notes!). The ‘Think A-Team’ website also makes it easy to request and pay for services.
Towards this effort, I have had the privilege of working with some really interesting companies on their growth journey. Including some where the client and me have never met in person!
I am now confident that this model works. Going forward, my focus will continue to be on making the services increasingly effective. As also, they will be relevant & accessible to needs of young, innovative companies in the years to come.
Below is the updated list of services I am offering via Think A-Team. Get in touch today to request one or more!
Do note that limited assignment slots are available every month. So call or email if you would like to reserve one.
I also request you to kindly spread the word to any startups that you feel would benefit from these services.
A Rural Electric Ride
While a lot of us are busy in our world of self-indulgence, it’s reassuring to know there are Indians like Ratan Tata, who’d go the distance with regard to businesses that positively impact to one or more segments of the population.
I’m speaking about the Nano in particular here, the world’s cheapest car that was inspired by the concern Mr. Tata had for a number of Indian families that traveled with their spouse and children on two-wheelers, and the risk that posed to their safety.
Now I’ve written a few posts mentioning the Nano, though I don’t think I’ve written enough about that business and engineering marvel.
Anyway, here’s a relatively unheard of company in the field of ‘affordable’ AND ‘electric’ cycles, scooters & load carriers from India.
Hemalatha Annamalai of Coimbatore, the founder of Ampere Vehicles Pvt. Ltd., has been making affordable electric vehicles since 2008. What’s better, is that she has a focus on rural transportation. And it gets better. She is backed by Kris Gopalakrishnan, one of the co-founders of Infosys. And none other than the original king of low-cost vehicles in India, Mr. Ratan Tata himself.
May there be more entrepreneurs like her.
Read more about her and her vehicles here: link
Think A-Team: For the Design & Strategy needs of Young Businesses
Hi, all you enterprising entrepreneurs,
I am pleased to give to you, ‘Think A-Team’, a growth partnering service for all your business strategy needs.
The intention behind it, is to help you make your business challenges a little less challenging. And to work with you on growing your business faster & better.
The services I have selected to offer, are a result of nearly a decade of close working with entrepreneurs and young businesses. While the portfolio of services will evolve with time, what will remain constant is reliability, effectiveness, accessibility and affordability to young businesses that have had few, if any options as far as growth partners go.
Give it a try today! And I’ll look forward to working with some of you enterprising folks on building your businesses for you.
Have an awesome weekend!!