Why Start-Ups Fail And How To Learn And Grow From Failures

Ashutosh Garg talks about why 90% of the startups do not cross the finish line and how one can avoid being amongst those failed ventures. He says that simply getting an idea is not enough to help you create a unicorn in the Indian market. It is an equal proportions mix of a fantastic idea, sticking to the course, implementing the idea and sustaining it that ascertains any venture’s success.

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The best time to raise money is when you have enough in your bank.

Ashutosh Garg

Getting an idea is not enough when it comes to creating a unicorn in today’s Indian market. Staying the course, implementing the ideas, and sustaining the success are equally crucial aspects.

Ashutosh Garg

Don’t look at a failure as a business gone wrong. Look it as an opportunity where you have acquired a lot of experience.

Ashutosh Garg

There is always a risk associated with getting an outside investor. If you bring one in too early, you may end up diluting your own shareholding so quickly that before your idea is successful, you may not be in full control of your own company.

Ashutosh Garg

Usually, in the world of startups, when young and enthusiastic mavericks set out to build something new out of a promising idea, they rarely give a fleeting thought to the possibility of failure. Establishing something new based off something you conceptualised is an extremely exciting prospect. At the same time, though, an entrepreneurial dream demands meticulous planning and a deep understanding of everything that could possibly go wrong so that a ‘crash and burn’ kind of situation can be averted. Being ignorant about potential setbacks that could rock the boat in future and an inability to envision solutions for such roadblocks well in advance are shortcomings that come back to haunt most young business owners especially when things start going south.

Essence

What is the general trend you notice with startups?

Let’s look at startups not just in India but across the world. It is a very exciting space.There is no age limit for starting your own venture. Once you have decided to take the plunge, you deal with risks, fussy opportunities, and other challenges that come along with an entrepreneurial setup. Unfortunately a large number of start-ups don’t make it past the finish line. It is, therefore, very important for everyone to understand and recognise that getting an idea is not enough when it comes to creating a unicorn in today’s Indian market. Staying the course, implementing the ideas, and sustaining the success are equally crucial aspects.

Why do you think that 90% of startups are more likely to fail than succeed.

First, let us spend a moment pondering about why we rarely hear about startups that fail. Start-ups that are not making it are given a quiet burial and people move on. My advice to all young entrepreneur is that a failure must not be seen as the end of the world. Don’t look at a failure as a business gone wrong. Look it as an opportunity where you have acquired a lot of experience. This experience will help you handle challenges more better in your next venture.

A lot of start-ups are built on current trends. Do you think such ventures succeed in the long term?

There is a very old term for such products and it is -me-too products. The person who pioneers a product or a service and sees through the implementation of that new idea is generally a winner. The biggest compliment that one can get is others trying to copy one’s idea and attempting to do the same thing or something slightly better. However, a majority of people who have copied the idea have nothing original to contribute to the idea and, therefore, they don’t have the ability to sustain themselves. So, the important thing is to get an idea, but even more important is to implement that idea and keep innovating.

What are flawed business ideas?

Let is take an example to understand this better. For men, Gillette blades are a product that everyone uses. Gillette, owned by Procter and Gamble, controls about 95 or 96% of market share. Till very recently if anyone claimed that they could outshine Gillette, their idea would have been branded as a flawed idea because taking on such a dominant player and succeeding is a difficult proposition. The other kind of flawed business idea stems form serious errors in the assumptions about the capability of your product or service.

As an entrepreneur, is it important to step away once your product or service starts doing well?

Remember that the team that starts a business is not necessarily the right team to see it through to the next stage. The team that starts the business has a certain degree of passion which is required to set up something. However, when the business starts to get big, it needs systems and processes. A lot of startup teams are not used to processes because they are used their very own maverick style of functioning. The entrepreneur and the original management team have to reinvent themselves once the business gets larger.

How important is learning the art of delegation?

It is extremely important because the more one individual or a group of individuals try to handle all the time, the less time they will have to strategize and grow the company.

Is it better to gather funds yourself and start a new business or should one look for an investor?

There is always a risk associated with getting an outside investor. If you bring one in too early, you may end up diluting your own shareholding so quickly that before your idea is successful, you may not be in full control of your own company. Therefore, I advise young entrepreneurs to put whatever money they have, raise money from friends and family, then go to angel investors who will put small sums of money. Approach private equity at a much later stage because the primary interest of such an investor is to make money from money. While this investor will support you, he is accountable to his shareholders to see what returns he is getting from the money he is investing in your company.

Do you think management teams play a very crucial role while scaling up?

It is important to have a good management team and it is also important to get the right team at the right time. On one end, there are entrepreneurs who do not delegate at all and on the other end there are those who load up their management team with so many people that they end up spending a lot of money on their salaries. These executives are not just expensive but having too many of them also leads to the entry of politics in your organisation. Therefore, you have to be very careful and you have to strike a balance between when you want to get the people in and how much you want to delegate. Additionally, these people should be of very high calibre. Get people whom you would aspire to have in your company.

What do you think is most tricky about scaling up?

One mistake many entrepreneurs make is that they try to go into areas that they are not comfortable with or before their organisation is ready. You need to make sure that you have the ability to manage multiple locations. You need to have multiple managers, whom you trust and who can manage phase 2 of your business. Scaling up helps you expand exponentially but at the same time to manage such growth you need very strong control systems in place.

How do you gauge whether you and your company are ready to scale or not?

That’s a difficult assessment to make. It is partly instinctive. Often the entrepreneur knows when he or she has saturated the amount of market share they can take in their current market and that’s when they feel that hey are ready to expand to another location. Every market has its own set of assumptions. There are local requirements that one needs to figure out.

What would you deem the major reason for failure?

The single most important challenge is when companies run out of money and the entrepreneur does not plan ahead. Instead of going into panic mode at the last minute and ruining everything it is always better to begin raising money when you have enough in the bank. If you do find yourself in such a position, try to quickly figure out a way to raise money because not being able to raise money means that you will have to give up on your dream. If that is not possible, try to find a buyer for a business so that your business is able to live on.

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