Info-tech

Why start-ups fail even when they don’t face a cash crunch

Sangeetha Chengappa Bengaluru | Updated on November 14, 2018 Published on November 14, 2018

The tech teams that create the user platform are unable to demonstrate scale to investors

Last year, 277 start-ups shut shop as per data sourced from venture capital research firm Tracxn. A Nasscom report reveals that 55 per cent of failed start-ups have received funding. If cash crunch is not the primary reason for start-up failure, then what is?

“Hiring strong technical talent is directly linked to a consumer internet start-up’s success,” said Deepak Singh Ahlawat, founder of CTO (chief technology officer) recruitment firm, Purple Quarter.

Start-ups fail to execute their vision because tech teams, which are responsible for creating the user platform, are unable to demonstrate scale to investors after the initial funding round.

Consequently, the start-up fails to raise another round of funding, observed Ahlawat, who is responsible for building Flipkart and Myntra’s core IT team and, more recently, Swiggy’s entire top management tech team, including Dale Vaz who quit Amazon after 11 years to join Swiggy as its Head of Engineering and Data Sciences.

“The ugliest mistake a start-up can make is not to hire the right profile for the CTO role,” believes Sanchit Vir Gogia, Chief Analyst, Greyhound Research. “The CTO must have a deep tech focus and skills in new-age technologies, be nimble, agile, and come with zero baggage.”

Growing demand for high-quality tech talent at the CTO and VP levels at ₹1 crore to ₹6 crore per annum packages has seen Purple Quarter close four top tech management positions for InMobi, BrowserStack, Swiggy and Rivigo in the last few months with six more positions to be closed by December.

Tech talent availability

Top tech talent is hard to find and most start-ups scout for talent from Google, Amazon or Facebook — companies that have seen massive scale and are home to almost 60 per cent of the tech talent that start-ups want.

“Start-ups are good in hiring one or two brilliant tech talent but fail when they have to scale up the same quality of talent. This is why some of the great ideas/start-ups, who show rapid momentum at first, fail to take off,” said Kamal Karanth, co-founder of specialist staffing firm, Xpheno.

Delayed hiring cycles

“Much of the senior tech hiring depends on founders’ availability, increasing the cycle time to hire. Founders’ romanticism also comes in the way, as they want someone as passionate, entrepreneurial and even people who are like them. They end up meeting many candidates and by the time they decide, the candidate is no longer available,” added Karanth.

Xpheno has also seen rising demand for tech talent in the 5-10 year experience levels from start-ups. According to Randstad India, the requirement for mid-senior tech roles posted by mid-late stage start-ups that have raised funding in the last 90 days is in the areas of data science, user experience, product development and mobile capabilities.

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Published on November 14, 2018
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