Key Takeaways
Any time is a good time to start a company.
Ideas are a commodity. Execution of them is not.
Chase the vision, not the money, the money will end up following you.
You just have to pay attention to what people need and what has not been done.
I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not trying.
The Real Meaning of Start-ups: A Guide to Funding
Introduction
Before jumping into a startup or business, it's vital to understand some key things. First, know your business inside out and figure out when it's right to ask investors for money. Also, learn from the mistakes commonly made by startups to boost your chances of success. Take the time to grasp all the basics of starting a business.
These are things that you won't necessarily learn in traditional education. Remember, startups aren't just about fast growth or making big bucks. They're about innovation, problem-solving, and making a positive impact on the world. So, focus on more than just the money.
Start-up's misconceptions
Let's start by discussing how many of us have misconceptions about start-ups. We often think that they're all about coming up with super creative ideas, getting lots of money from investors, and quickly becoming wealthy and famous. But that's not how it usually goes. The truth is, that starting a business and getting funding is much harder and takes longer than we think. So, what we imagine about start-ups isn't always how it really works.
What is the real meaning of start-ups?
Even though start-ups come up with new ideas, they also create jobs, which means more chances for people to have careers. When more people have jobs, it makes the country stronger and helps it become well-known around the world. It also means the country isn't relying too much on other countries' stuff. A stronger economy helps cities where start-ups are based to grow and develop.
What are start-ups?
Start-ups are young companies created to bring unique products or services to the market. These companies often start small but aim big, looking to introduce new ideas or improve how certain things are done. Think of a start-up as the seed of a plant that's just beginning to grow. Just like the seed that wants to become a big tree one day, start-ups aspire to grow, reach more people, and make a significant impact. They are known for their innovation, energy, and the drive to turn their visions into reality, tackling problems in ways that haven't been tried before.
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Here are a few real examples of start-up misconceptions in our minds:
If you're starting a tea shop, grocery store, or a medical shop and calling it a start-up, you're mistaken. These are traditional businesses. That's because you're not introducing anything new or beneficial to society that hasn't been done before.
Here are some common wrong ideas people have about start-ups in India, explained
1. Quick Money: Some folks think starting a start-up means you'll get rich fast. But in truth, it takes a ton of effort, time, and patience to make a business successful.
2. Tech Only: Some think all start-ups are about technology. But actually, start-ups can be in any field, like food, fashion, healthcare, or education.
3. Money Means Success: Some believe if a start-up gets money from investors, it's a guaranteed win. But getting funds is just part of the puzzle. A start-up needs a good plan, a great team, and customers who want what they're offering.
4. Going It Alone: Many think start-ups are a one-person show. But most successful ones have teams of people working together to make things happen.
5. Instant Success: Some think start-ups become successful overnight. But in reality, it takes years of hard work, setbacks, and learning to make it big.
Also Read: How Parle G: Became the King of Biscuits Industry?
Why do start-ups lose money?
Credit: Freepik
Starting a business is like going on a big adventure. It's exciting but also comes with challenges. One common problem for new businesses, called start-ups, is dealing with money loss. This might sound scary, but knowing why it happens can help new business owners understand and deal with it.
1. Learning from Mistakes
Starting a business is like learning to ride a bike. You're bound to fall a few times before you get it right. Similarly, making mistakes is normal when starting a business. Whether it's misjudging what customers want or spending too much money, these mistakes can lead to losing money. But each mistake teaches valuable lessons for the future.
2. Spending Big to Grow
Many start-ups believe they need to spend a lot of money to make a lot of money. They invest heavily in things like advertising, making their product better, and getting a nice office. For example, a new tech company might spend a ton of money making a fancy app, hoping it'll bring in lots of cash later. But if not enough people use the app, the company can lose money fast.
3. Battling with Competition
The business world is like a battlefield, and every start-up wants to win. This means they have to keep up with other companies and come up with new ideas, which can be expensive. For instance, a small food delivery start-up might struggle to compete with big companies like Zomato or Swiggy. So, they might spend a lot of money on ads just to get noticed, which can hurt their finances.
4. Waiting for Profits
Making money takes time, especially for start-ups. It can take years before they start earning more money than they spend. This can be tough on the money they started with and cause losses at the beginning. Take Amazon, for example. It didn't make a profit for a long time, but now it's a huge success!
I know when we talk about online shopping the first thing that comes to our mind, is that online shopping means Amazon, it’s the first choice of most Indians. And I don't think I need to explain why. Every Indian knows the reasons behind it.
Also Read: How to Build A Big Brand Without Money In 2024
Real-World Examples
Focusing on the Indian start-up ecosystem, which has been booming with innovation and entrepreneurship, we find that many start-ups face similar challenges to those globally, leading to financial losses in their initial phases. Here are some real-world examples from India:
1. Flipkart
Before becoming a household name in online retail in India, Flipkart endured several years of financial losses. Founded in 2007 by Sachin Bansal and Binny Bansal, it initially focused on book sales before expanding into other product categories. The company invested heavily in building its supply chain, customer acquisition, and technology infrastructure. Despite these investments leading to significant losses, Flipkart's long-term strategy paid off, eventually attracting substantial funding and being acquired by Walmart in 2018 for $16 billion.
2. Ola
Ola, a ride-hailing service competing with Uber in India, has also seen its share of financial ups and downs. Founded in 2010, Ola expanded aggressively across India, spending substantially on driver incentives and customer discounts to capture market share. This strategy, while effective in growing its user base, resulted in considerable financial losses. Despite these challenges, Ola has continued to innovate, venturing into electric mobility and international markets.
3. Paytm
Paytm, a leader in India's digital payment sector, initially faced financial losses as it sought to expand its services. Founded in 2010 by Vijay Shekhar Sharma, Paytm transitioned from mobile recharges to a full-fledged digital wallet and then to a payments bank. Building such a diverse financial ecosystem required significant capital for technology development, marketing to acquire users, and compliance with financial regulations. Though it incurred losses, Paytm’s comprehensive services eventually drew a vast customer base, leading to its success as a fintech giant.
4. Snapdeal
Snapdeal, an online marketplace, experienced rapid growth followed by substantial financial losses. Founded in 2010 by Kunal Bahl and Rohit Bansal, Snapdeal grew by adding more categories and increasing its seller base. However, intense competition from Flipkart and Amazon India, coupled with a focus on rapid growth over unit economics, led to significant losses. The company had to undergo a major restructuring and focus shift to survive, highlighting the precarious nature of scaling operations in the competitive e-commerce space.
5. Zomato
Zomato, a restaurant aggregator and food delivery start-up, faced years of losses as it expanded its services across India and internationally. Founded in 2008, Zomato spent extensively on acquiring users, entering new markets, and acquiring smaller competitors to dominate the food delivery space. These efforts, while successful in making Zomato a leading food tech company, also resulted in financial losses. However, Zomato's persistence paid off when it went public in 2021, showcasing investor confidence in its long-term potential.
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Why do Indian start-ups fail?
Credit: StartupTalky
In our experience and from studying numerous business case studies, we've noticed some common trends in the Indian mindset. For instance, many of us are quick to be influenced by news channels that boast about start-ups receiving millions of dollars in funding from investors. People often get swayed by others without really knowing their personality, and traits, or understanding the full story behind why they received such large investments. This tendency makes it challenging for individuals to truly grasp their own passions and interests before jumping into something.
Reference: 95% of start-ups fail due to a lack of mentors
Experts say that many start-ups fail because they lack the right mentors, advisors, and guides. At the launch of the Leapahead Start-up Summit, industry leaders shared their experiences. Chief Mentor and Founder of PaidUp Ventures, Pankaj Thakar, expressed his sadness about the fact that 95% of start-ups fail while only 5% succeed.
Here are some common reasons why they fail:
1. They don't realize how start-ups work or how to build billion-dollar companies. Becoming a successful entrepreneur and creating a billion-dollar company doesn't happen overnight, or in just a few months or even a few years. It takes 5 to 10 years to establish a successful business. It requires setting long-term goals, making long-term plans, and having a solid strategy.
2. One big reason is they create things that nobody really needs. They might think their idea is awesome, but if nobody wants it, nobody will buy it. For instance, they might make an app they think is great, but if nobody finds it useful, it won't sell.
3. Start-ups often get money from investors, but some spend it too fast. They try to grow quickly without thinking about the future. They spend a lot on ads, hiring, and growing, but forget to make enough money to keep going.
4. Even if they have a great product, their plan to make money might not work. They might price things wrong, spend too much, or not make enough money. This means they can't keep going in the long run.
5. In India, there's a ton of competition. Start-ups have to compete with big companies with lots of money. For example, many e-commerce and food delivery start-ups struggle because they can't offer as good deals as the big companies.
6. India has many rules and regulations that start-ups have to follow. If they can't keep up with the changes or follow the rules, they can get into trouble.
7. Sometimes, the people running the start-up don't have enough experience. Running a start-up is tough and needs smart decisions. If the leaders don't know what they're doing, the start-up can fail.
8. Ignoring what customers say is a big mistake. Some start-ups love their idea so much that they don't listen to what customers want. But to succeed, they need to listen and change things based on what customers say.
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How to get funding for a start-up that's not making money?
Getting funding for a start-up that isn't yet generating revenue can seem daunting, but it's entirely possible with the right approach. The key is to show why your business idea is great and why your team is strong. Make a good plan that explains what makes your business special, how big the market is, and how you'll make money. Meet people in your industry, both online and in person, to find investors. There are different ways to get money, like from individuals, big investment firms, or through crowdfunding.
Make sure to talk to each group in a way that makes sense to them. Show that you're serious and that your start-up is making progress, even if you're not making money yet. This could mean showing off your product, talking about your research, or sharing feedback from early users. Keep at it and have a good plan, and you can get money for your start-up.
Why do investors like putting money into start-ups?
Investors like putting money into start-ups because they see the potential to make a lot more money in the future. When they invest early in a start-up, they can get a big return on their investment if the company becomes successful. Plus, investing in start-ups can be exciting and give them a chance to be part of something new and innovative.
Investors' chances of making money depend on how well the start-up does. If the start-up fails, they might not get any money back. But if it succeeds, they could make a lot more money than they put in, sometimes even a lot more than they expected.
For instance, let's say an investor has an extra 1 crore rupees to invest, and they're quite clever. They decide to invest 1 lakh rupees in 100 different start-ups. Even if most of these start-ups, about 90 to 95%, fail, if just 5 to 10% of them succeed, they could get back 50 to 100 times more money than they initially invested.
How do start-ups help a country's economy?
Start-ups contribute to a country's economy by creating jobs, fostering innovation, and driving economic growth. When start-ups hire employees, they reduce unemployment rates and increase consumer spending, which boosts local economies. Additionally, start-ups often introduce new products, services, and technologies, stimulating competition and productivity across industries.
Successful start-ups may also attract investment from both domestic and foreign sources, further fueling economic expansion and prosperity. Overall, start-ups play a vital role in driving innovation, employment, and economic progress within a country.
Also Read: How Productivity Drives Success in the Modern Workplace?
What does a businessman do in a start-up?
In a startup, a businessman typically takes on various roles to help the business grow and succeed. Some common tasks include:
1. They create plans and strategies to guide the startup towards its goals.
2. They seek out opportunities for partnerships, collaborations, and expansion.
3. They promote the startup's products or services and work on increasing sales.
4. They handle budgets, financial projections, and fundraising efforts.
5. They recruit and manage a team, ensuring everyone is working effectively towards the startup's objectives.
6. They build relationships with investors, customers, and other stakeholders.
In India, some common mistakes businessmen make in startups include:
1. Not understanding the unique needs and preferences of Indian consumers can lead to products or services that don't resonate well.
2. Failing to navigate the complex regulatory landscape in India can lead to legal issues and setbacks.
3. Rapid expansion without solid foundations can strain resources and lead to failure.
4. Not prioritizing hiring the right talent can hinder growth and innovation.
5. Not adapting business practices to suit Indian culture can alienate customers and hinder success.
6. Being rigid in approach and not adapting to changes in the market or customer feedback can lead to obsolescence.
7. Founders taking a big salary when their startup needs more investment can hurt the business.
By avoiding these mistakes and focusing on understanding the Indian market, adapting strategies accordingly, and building a strong team, businessmen can increase their chances of success in Indian startups.
How can someone start a new business?
Starting a new business in India is like planting a seed and helping it grow. Here's a simple guide:
1. Think of a business idea that solves a real-life problem or meets a need. It could be a product or a service.
2. Learn about the market you want to enter. Who are your competitors? Who are your potential customers? Understand the demand for your product or service.
3. Create a business plan. Outline your goals, target audience, pricing strategy, and how you'll reach customers. Also, think about the resources you'll need.
4. Register your business with the appropriate government authorities. Choose a legal structure like a sole proprietorship, partnership, or company.
5. Determine how much money you'll need to start and operate your business. You can self-fund, seek loans from banks, or attract investors.
6. Put your plan into action. Build your product or set up your service. Hire employees if needed and start marketing to attract customers.
7. Be flexible and ready to adapt. Listen to feedback from customers and make changes accordingly.
8. Building a business takes time and effort. Stay committed and keep working hard, even when faced with challenges.
Remember, starting a business is a journey. Stay focused on your goals and keep moving forward step by step.
Additional Note:
Before starting a business, it's important to know that getting money from investors isn't always the best move. Many startups raise funds early even when they don't really need it. Just because you get funding doesn't guarantee success. In fact, we've seen that raising money too soon and not managing finances well are big reasons why startups fail. It's better to focus on bootstrapping your business, which means using your own resources to grow. This approach can often be more helpful for startups. Here are some key points:
1. Bootstrapping means using your own money and resources to start and grow your business. You're not relying on investors or loans.
2. Since you're not taking money from investors, you get to make all the decisions about your business. You don't have to answer to anyone else.
3. Bootstrapping forces you to be careful with your money. You learn to spend wisely and make every dollar count.
4. Without the mental pressure to quickly make a profit for investors, you can focus on making your product or service as good as possible.
5. Bootstrapping allows you to grow your business at your own pace. You're not rushed to expand before you're ready.
6. By building your business slowly and steadily, you're more likely to create a solid foundation for long-term success.
Conclusion
In conclusion, starting a business or a startup requires careful consideration and understanding of its various aspects. By learning from common mistakes, knowing when to seek funding, and grasping the fundamentals, you can increase your chances of success. Remember, startups aren't solely about making money; they're about innovation and making a difference. So, focus on solving problems and creating value rather than just chasing profits. With dedication and the right approach, your startup can thrive and make a positive impact.
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