Aiming a bite of the Startup pie

Rajesh Sawhney, Founder, GSF Accelerator, and Co-founder, InnerChef shares his perspectives on the current startup momentum both as an investor and entrepreneur.

Is there any specific business model that startups should have?

Different startups have different business models it’s incorrect to club them as one. Whenever an industry grows, there will be a lot of startups which will start and inevitably some startups will shut down. It’s in the nature of the venture business. Nature of startups is that 90 percent of startups will shut down.

That’s how businesses are. Three years back, there was no company that had $1 billion valuation, there are 10 now. If you look at another five years there will be another 10 companies. Look at organized retail. It is 10-15 years old. All of them are bleeding losses. So why is that model superior to online? Some businesses have long-term gestation period. They take time to go to a profitable stage. As long as they are growing it’s good.

There will be failures on the way. But it’s all right. That’s how this game is played. As a nation we should celebrate failures. We are at a very early stage of a very long cycle of tech investing. This is not the time to panic. It’s time to invest.

Startups live in a very Darwinian world. They live from one funding cycle to another funding cycle. I think there are enough jobs for the people in the economy. People can find new jobs. I think there will be some startups that will shut down and this is inevitable. There will be layoffs it’s alright. 

It happens in all industries. They do shut down. Second is the manner in which these things are handled by the management team. I think that’s where it could be more sophisticated and mature. And in a country like ours we need to deal with it with more sensitivity.

Do you think investors are patient enough to wait for the long haul?

There has been lot of venture investing in India but not many exits. That’s one of the problems. This shows they are patient and more money is coming in. I don’t think patience of investors is a problem. Nature of the market is such that it takes a little longer to scale the market to IPO. We are where China was 10 years back. Currently there are 10 companies that can do IPO. Depending on the market situation, next two-three years could see those IPOs.

In the last five years, Indian consumers have become habituated of discounts. It has got to beat a stage where consumer is not waiting for discounts. Having said that I think India is a very value-conscious market. I don’t see discounts coming down in immediate future. I think they will taper off in the long-term as consumers become more sophisticated and mature.

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