Day of Reckoning: Unicorns, Start-ups and The Entrepreneurial Ecosystem
Start-ups, particularly the unicorns are receiving attention, and rightly so. Of particular interest to the community is their ability to ‘solve’ problems across multiple dimensions, something that established organizations have ignored, or failed to address.
Investors believe there is money to be made. The ecosystem sees them as growth drivers, job creators and a catalyst across the larger context.
Changing tides; ‘auspicious’ occasion for the entrepreneurial ecosystem
There have been several things going for them. One can’t recall another single more ‘auspicious’ occasion when technology, income inflection, abundance & cheap capital, productive talent and entrepreneurs focused policy have coalesced.
Most start-ups are focussing on solutions related to ‘quicker-cheaper’. The more evolved few are on the cusp of fusing online-offline services, and embedded themselves in the consumer mindspace. They solve real problems. Handfuls amongst these have created transformational business models by intertwining innovation & scale. They are triggering socio-economic development.
A Crux study across 500 entrepreneurs, 100 investors and a clutch of ‘eco-supports’ (accelerators, incubators and others) and focusing on start-up growth drivers and challenges points at blue sky. Study also examined the motivational drivers, the role of the government and its economic facing institutions. Study highlights that 80% of the founders are inspired; driven by passion and curiosity. Solving problems stimulates them. They have intrinsic motivation to ‘make a difference’.
Elephants don’t innovate. Bees do; are passionate, motivated & serve
Most large and established entities are not nimble enough to innovate rapidly. In addition, they have an existing business to grow. They splice businesses vertically. Transition takes time. Change management is difficult, presents short-term upheavals. It confuses the employees, makes other stakeholders nervous. The stock markets are often not kind to disruptions.
Our start-up ecosystem is the third largest, over 75,000 (a fifth in the technology space) strong, growing at about 15%. It creates over 60,000 new jobs annually, accounting for about 5% of incremental jobs.
Catalyse growth, trigger jobs
As per the Crux study, it is unlikely that start-ups will generate large scale employment. However, if they achieve scale, they will prove to be both a ‘flagstone and pillar’ to the large organisations who suffer the absence of ‘tributaries and distributers’, particularly logistics partners and rapid ‘innovators’.
The onus is on both the sides. Established cos need partners to sew up the loose ends, bridge, accelerate, innovate and ‘pave the last mile’ execution. This presents a cohesive opportunity.
The study highlights Unicorn statuses notwithstanding, most are still a distance away from ‘filling in’. It also articulates that start-up ecosystem will need real reforms; hope for favourable business climate. However, their relevance will be driven by their ability to innovate & invest in their customers, and address the needs of the society at large.
Those who take ‘addressable’ market size for granted will find the going tough. Addressable market is both ‘intent to buy, ability to pay’.
They must choose well, not get carried away by the numbers.
India is many markets, and defined. Not homogenous, hardly porous.
Six hundred million are deprived, mostly. Five million live like royalty.
Start-ups’ market is the 300 million middle & aspiring, and at inflection point. They will acquire their first car today, borrow to own a home tomorrow. They may not seek financial assets yet. But who knows tomorrow?
It is the ‘aspiring’ class that needs innovation pivoted, digital enabled low-cost, and high-impact solutions. Start-ups can also start nibbling at the other 200 million consumers with a per capita income of over 5000 USD (mostly ‘disposable’).
Most tech-pivoted start-ups need to keep their eyes on the number of smartphones, demography data costs & penetration. What was road connectivity to the earlier generation entrepreneurs are data, connectivity and smartphones to the present start-ups.
Growth enlarges the addressable market, provides potential to upscale.
Heterogeneity makes product development onerous. Scaling becomes risky.
It’s worrisome when ride sharing start-ups positions itself as logistics company. They must abandon the temptation to be everything for everyone. This is attention deficit. Recklessness can destroy business. And postpone the ambition to be pan-India unless there is digital in play. Instead ‘identify’ the niche market, focus on smaller geographies, narrow verticals, and ‘peek’ in the crannies. Start-ups must create aligned solutions, ‘cream’ the layers of the Indian consuming class, for better outcome, quicker win. They must innovate, and scale this opportunity.
Growth can be exponential, even imminent.
Balance optimism with realism
Optimism must not get in the way of good judgment. The key is to get a wider understanding of the customer, and deeper consumer engagement. They must plan for eventualities. Plans often go wrong. They will. Similarly they need to develop native shrewdness, a wider understanding of commerce.
Unlike the larger and entrenched competitors they lack the pricing power to ‘sell’ to the ‘notoriously’ value sensitive customers. Similarly they do not have the bandwidth to collaborate on ‘favourable’ terms, end up ceding more than they receive.
Inexperience doesn’t help either.
This government has, both arduously and meaningfully slanted its energy towards entrepreneurship. Ease of doing business is the focus.
Digital and physical infrastructure is a long term multiplier. Roads are as empowering as smartphones.
The mentorship ecosystem is growing. Incubators and accelerators have provided the much needed nurturing. They prop and support with resources and services including prototyping, proof of concept etc.
‘Markets’ at large, have responsibilities too. Value of every user is not the same. Pricing is not the same as valuation; and must be realistic. It hasn’t been.
Stars aligned. Gods are smiling
The last decade has been a great ride for many. Better days are ahead. Speed is critical for those who have ‘graduated to stage two; to capture and commercialise the opportunities. And scale.
However everyone will not succeed, but it’s going to be exciting nevertheless. For many others it’s going to be even more exciting, if not rewarding as they borough, tread and ride the challenges.
But a select few will accelerate their way to greatness. And sustain, if they stay true to the path.
