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Improving Entrepreneurs' Odds of Success - The Institutional Way

Improving Entrepreneurs' Odds of Success - The Institutional Way
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You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Being late brings with it certain advantages. You know what works and what does not. You do not have to repeat the mistakes of the early ones. And hence, you can move fast. In India, we have seen it happen in many areas involving technology. We have overtaken the United States to be the number 2 in internet users. Our mobile consumer base is the third largest in the world. We have biometric identity for more than a billion Indians. We are the world's fastest growing e-commerce market. So what's next - Entrepreneurship?

Premature to hail startups?

What we have seen in startup space in the last few years is impressive. It has inspired an entire generation. We have become the third largest startup ecosystem in the world. It may seem we have arrived. But, right now despite all the hype, it is a mere promise. It is too premature to declare victory or rest on our achievements. What can we do to realise this promise and surge ahead? Obviously, a lot needs to be done. And, much of what we have to do is in the early stage ecosystem (involving startups which are less than 24 months old). What happens to most startups in their first 24 months will determine how mature our startup ecosystem will evolve into. This is true for most other countries which have a lot of start-ups and have had them for a much longer time than us.

Dire need of more investors

This will require two things. First, we need more investors. And, we don't have enough. Second, we need more startups that go on to build successful businesses.To support the tens of startups that are being founded every day, we need more investors who can invest in the early stages. In the U.S., for instance, angels make 16 times more investments than VCs. With close to 3,16,000 angel investors there are about 6 such investors for every startup. Axilor's estimate pegs this number for India at 0.2. The angel investors in the U.S. also bring in operating experience and mentoring in addition to the capital. Bridging this gap in India will require institutional capacity to be built.

Statistics are not in favour of startups. A very small percentage live to see their second anniversary. The reasons for failure vary. A few of them are unique to the idea, team or business model. But, most of the reasons are common. As startups grow older and scale, they could face bigger problems. They could run out of money before they become sustainable, their products or services may not be differentiated enough for them to continuing growing fast or they may just struggle to scale. However, for startups that are just starting up, the reasons are not just common but also predictable. They could improve their odds of success by merely avoiding many of the predictable mistakes.

Mistakes entrepreneurs make

Let me take two examples to illustrate - one on funding and second on the product. Most entrepreneurs underestimate the importance of setting up their startup the right way. And those who go on to do well will be the ones most impacted when they go out to raise funds. In the last one year, we have seen many examples where funding was delayed for months because the founders ignored the basics of setting up right. The second common mistake I have seen in founders is raising too much or too little. Raising too much ahead of business needs often results in needless dilution for founders. Many founders have also been brought up to believe that raising capital is an end in itself and signifies success. Too many of them also believe that capital in itself is a competitive advantage. The last six months have proven that both these beliefs can have dangerous consequences. Capital is neither a substitute for customer insights nor can you 'buy' customer loyalty with it.

The second most common reflex is to build something without figuring out whether the need exists and who needs it. Even the best of products are less than half ready when they are launched - it is the constant feedback from users that allow them to build the remainder and make it better. Whether your user is an enterprise or a consumer, building your product for someone's need is always better than building based on your opinion. In our accelerator program the teams that make the least progress are the ones that are unable to build this discipline. In our latest accelerator batch, half the teams have launched a pilot within eight weeks into the 100 day program.

Entrepreneurship is an endeavour where the odds of success is low. But, that need not make it a game of chance! We started Axilor with a vision of improving the odds of success of early stage entrepreneurs. If there is one thing that has become clear in Axilor's first year of operations it is simply this. The right discipline, the right capital and the right advice at the right time can make a big difference to the success of founders in their early days.

For the entrepreneurship revolution to deliver on its promise - many things will have to happen, quickly and simultaneously. 1) more start-ups have to succeed early on 2) we need start-ups in sectors beyond digital commerce 3) we, collectively, have to unleash the science residing within the confines of labs into the market by empowering scientists/ researchers with business prowess 4) lastly, we need platforms that can support each of these problems separately or together.  At Axilor, we have taken our first, deliberate step in the first year - focusing on building institutional capacity to help entrepreneurs in their early stages and attracting startups in lagging sectors like healthcare.

Axilor is a platform for early stage start-ups. It runs three programs: the accelerator, scale-up and early stage funding programs. Axilor opens its Accelerator program applications for Winter Batch. 

Edition: December 2016

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