Where are the investors for Unhatched Startups?
By Nalinikant Patro
Back in the days where .com boom didn’t cross our country, retailers were the prime rulers of the market and consumer market was only limited to hyper-local marketing, everything was simple and sane, until the TV shopping line opened up. Yes that’s where all the drama came along. The strategy to uplift the materialistic greed of middle class society through advertising and discount offers made people buy things they didn’t feel the need to buy in the first place.
CHANGE WAS GOOD
The .com boom swayed the market setup by the TV shopping marts and giants like Flipkart and Snap deal made their dominating entry to Indian market and consumed more than 20% of the total B2C e-commerce business, seeing growth of some of these web pioneers the startup boom followed and everything, entirely everything was sold or advertised online.
EVEN THE GIANTS FACED SIMILAR OR WORSE PROBLEMS ONCE
Every tree was once just a fragile seed, like the most valuable website on earth: FACEBOOK.
“In 2004 when there wasn’t any outside funding available, Mark put his own money into his business. It was a challenge for Mark Zuckerberg to find potential lead investors and it was required that Facebook must reach 1.5 million users by the end of 2004”
While one would argue that situation in Silicon Valley and India are very different, a similar situation occurred to our biggest online shopping mart of our country: FLIPKART
“Initially, they had spent ₹400,000 (US$5,900) only for making the website to set up the business”
Reference : www.wikipedia.com
PAST HAS SHOWN US SOME HOPE AND DISAPPOINTMENT TOO
While the big F’s were dominating the world it seemed we were gaining pace and investors were pouring money after their venture started generating profits as farmer draws water to its land after the first rain. While a lot of startups were lost in darkness like weed plants within the shadow of a banyan tree, some ventures gained high end connections like OYO did,
“Oravels pvt ltd couldn’t raise funds through acceleration programs to suffice for a big impact on the market, yet OYO received a $ 100,000 through Thiel fellowship and with VCs like peter Thiel backing Ritesh Agarwal, OYO is set to become one of the fastest unicorn companies in India”
While Ritesh Agarwal received a hefty amount at such a young age, his modest idea wasn’t very much praised by the elite community of India.
THE ONES WHO ARE CRAZY ENOUGH TO THINK THEY CAN CHANGE THE WORLD
Whereas this was seen as a positive growth from youth of India, 3 college students from Chennai contemplated its cons. they started with a simple peer to peer online delivery site with 2 small clothing shops. As they began to start they failed miserably, but these shops were renowned and trusted from nearby people, but as they entered the market they were revealed to the dark side of the startup system which they were going to be a part of and that answered their failure’s reason.
THE CUBS OF YESTERDAY HAVE BECOME THE LIONS TODAY
They realized that the price of products which are provided by the e-commerce giants and the discounts offered by the service apps were unparalleled to that of any retail store or service shops. with this and the amount invested on advertising of these products through several foreign banks it has literally become a one-sided war for the miserably loosing newbie startups, and thus even after getting funded lots and lots of these startups close their doors or referred to as imitators. With this in mind the 3 young entrepreneurs knew they have entered the Chakravyuh of the Mahabharata.
TRIED UNTIL THEY FAILED AGAIN
But this time they changed from their domain and tried to change the whole e-commerce market instead and redeem the retailers which were lost to e-commerce but this needed a relatively bigger seed capital and networking with high end brands. As the hunt for investor began they realized accelerators have taken over the internet pioneering startups and as sheep they too enrolled in one amongst hundreds. But with each time they sat back and waited the giants started to collaborate and started suppressing the newbie startups. With the fear to be diminished many of these newbies were bought too and many who struggled craved for more investors. All these things were so intimidating for the unhatched startups that the guys started to lose their faith on accelerators and started to approach VCs directly.
THE BIG BAD WORLD DIDN’T GIVE THEM A WARM WELCOME AT ALL
But what they saw as a revolutionizing social marketing site, VCs saw it as merely a hyper-local marketing aggregator. Come as it may, still the
“Hyper-local marketing target audience was estimated around 334 million $ in India in 2016”.
But as many e-commerce startups have drowned their precious thin papers, they hesitated to even consider their proposal. And the reasons they delivered were horrendous, like one of the high end advertising company’s VP said to them after reading their proposal (if at all he has):
“This lacks the guarantee on returns of the invested capital and can be risk for me” one of the biggest clichés used by todays capital owners,
But my question is, is there any business in this entire world which can guarantee a profit repeatedly? Our esteemed Prime Minister Narendra Modi started the MAKE IN INDIA program the same year their quest was on going. With rejection from VCs and distrust on accelerator programs, they turned their heads towards this opportunity as their start up could not only help India’s retailers but also degrade the foreign e-commerce site’s dominance over Indian startups. But their prayers remained unanswered, as the program was specifically for manufacturing and trading sector. But the drop in growth of retailer industry doesn’t seem to worry the Indian government somehow, as the growth of .com business is smartly creaming out the profits from India and the foreign banks backing these companies are piling up their profits day by day.
“As the total retailer market of India is 2nd highest in world, with a whopping 600 billion $, the failure rate of their startup was grievingly less”,
and thus with the hope that someday they’d change the e-commerce system with help of Indian government they’re still struggling, struggling to survive and waiting to thrive. like many other in our entrepreneurial community, even they began with a small dream, but the helplessness of retailers have put a responsibility on their shoulders, responsibility for their young minds to help them change their situation. And so with faith in their stars and passion in their hearts, they’re trying, cause that’s the only word that can truly describe the word entrepreneurs.
WHAT HAPPENS WITH OTHER TYPES OF START UPS?
Internet ventures aside, the manufacturing startups have their own kind of problems too, whereas the government has taken the liberty of assisting them to fulfill their dreams of becoming the future GDP growing pioneers of India, they face problems like, vendor management, loan sanction delaying, lack of advertisement capital.
While attending an entrepreneurship workshop at NISBUD, 2 particular individuals faced problems of 2 different kinds and that wasn’t end of it they were even unable to get cleared of all the return policies and complexities of the market itself.
Mr. Prem Prakash, a former bartender at five star restaurant gave away his job to pursue his dream of availing a bar in a place which was considered great even by the banks to give a credit line of Rs. 10,000,00/-, however how to cross the return guarantee if it cannot draw enough customer base.
“yes full marketing and set up of business has been handled by banks and some with my own purse, however the capital raised doesn’t involve the advertisement cost which could very well become the reason for not beating the matured bars out there”
Not only the geographically profitable business faced the problem some of the trading sector set up business faced similar kind of problem.
Pragati nair of Bangaluru who runs a boutique through profit on exchange said,
“the bankers wouldn’t give credit at all if the business has taken a degradation in its past record and if the personal bank records have been faulty once, with this if a business needs to expand it’ll have to take a hit in the present to grow in the future”
ONLY 1 % OF THE START UPS GET FUNDED
End of the line, the 1 % rule stands in the way for every incompetent and different project, they start with a different idea and while 60% of them would eventually become extinct and 20% wouldn’t meet the exact requirements of the long run, what about the rest 19%?
Whether its pre-ACHE DINN, or post-ACHE DINN the results for the startup funding scenario remains the same, while connections to high end society and party culture easily cream out the required capital and the creamy layer society of India and the fairer sex have also been given the best opportunities to showcase something they feel would work, the underdogs of corporate world are still waiting for their golden opportunity to hatch out of the unprecedented circle of doomed startups.
Here are some startup failure rates as given below:
Whether or not we admit to this, the money speaks its charms and as long as investors decide to play it safe, the startup scenario would remain same.
(-The writer is a Budding Entrepreneur and can be contacted at email@example.com)