For start-ups, failures are stepping stones to success

Start-ups tend to fail, that is the reality. The rigours and challenges of entrepreneurship are not for the faint hearted. The collapse of a new business may be unsettling for young entrepreneurs, but for many start-up veterans failure is a given.

Failure tends to affect people in different ways. While some entrepreneurs are so singed by it that they would rather retire to a dark hole, or go back to a day job, others bounce back, letting their learning from the failed venture shape their next start-up. 

“Creativity, clarity of thought, vision for the idea and enthusiasm are good reasons for a start-up to flourish. Unfortunately, that’s not adequate,” says Rajiv Sundar, Senior Director, Deloitte in India. “Quite a lot of other factors come into play in making a start-up a success story.”

While some entrepreneurs tend to be single minded with their strategies, many don't bother forming a balanced plan. Hemant Kanakia, lead investor at Indian Angel Network, says an entrepreneur’s life is never easy, “specifically in India, where people tend to judge every stage of a venture’s operations. The fear of an immediate successful future eradicates the entrepreneurial spirit of most.”

The same scene plays out globally too. Rajeev Banduni, CEO, GrowthEnabler, a virtual platform that offers mentoring to entrepreneurs and small businesses, cites a Harvard Business Review study that states that 80 per cent of start-ups shut down within 18 months. “Similar data for Indian start-ups are even more worrying. Estimates suggest that over 90 per cent of Indian start-ups suffer the same fate in the same time period.”

Sometimes a start-up can evolve from a simple idea to a world of legal complexities that can prove to be a core cause of shutting down a start-up. Other times, getting sidetracked by distracting projects or personal issues has contributed to failure. While obsessing over the competition is not healthy, ignoring them is a recipe for failure.

Experienced entrepreneurs note that running a company that eventually fails can actually help a career. They say it is imperative to view failure as a potential for improvement. Neeraj Kakkar, Founder and CEO, Hector Beverages Pvt Ltd, maker of drinks brand Paper Boat, says he has been part of a start-up journey where he learned things the hard way and had to pivot in the face of failure.

“The ability to not adapt and constantly learn is a reason for failure,” says Kakkar. Frissia, the first offering of Hector Beverages, failed as the “protein water brand in two flavours did not gel with consumers, who were not ready for a body supplement. Though we tried to sell it in gyms and in small sachets, it did not work. We failed, for we were asking people to change their habits, instead of identifying a consumer need and providing an acceptable solution. Frissia’s failure hit us hard,” says Kakkar, which led to the Paper Boat brand and energy drink Tzinga, “which are technically a result of Frissia’s failure.”

Shivakumar Ganesan, co-founder and CEO of Exotel, a cloud telephony company, has encountered failure. “Some start-ups fail because the idea may be ahead of its times. There are those who are forced to shut shop or pivot due to regulatory issues. And there are those that fail due to immature management,” he adds. 

Citing his own example, he says, “I pivoted from Roopit, (a curated web classified site), to Exotel. In a way, Roopit was ahead of its time. Mobile was a crucial component of my customer-to-customer business model at Roopit, but when I was running Roopit, mobile phone penetration was not as high as it is today.”

“At IAN, we not only back the right idea but also a passionate team with the right approach to build a strong successful venture of their own,” says Kanakia. He adds that most start-ups tend to be in a hurry to launch the product, and build weak management teams that hardly have knowledge about the product.

“More often than not, wrong mentorship and guidance lead to the failure of start-ups. Moreover, one needs to have the passion to drive a start-up to convert it into a fruitful venture,” he says.

Vipin Agarwal, co-founder and CEO, OnlineTyari, a test preparation platform, concurs with the view. “The ideal approach to building a business is to create a solution around users' problems. Many start-ups fail because they take the reverse approach, they build the product first and then try to find users for their product,” he says. 

“As long as a start-up is creating the relevant solution for the right pain point of users,” says Agarwal, “people adopt the solution irrespective of how good the user interface is, or how good or bad the marketing is, around the business.”

He mentions his first venture, enMarkit.com. “I built a product that helped e-commerce companies understand their customers' behaviour in real time. This was an extremely difficult problem to solve technically and we built many unique features around the product. However, we eventually realised that many of the features were not critically required by the e-commerce companies at that time and we could have offered a simple packaged solution.”

Lalit Mangal, co-founder and Chief Product Officer at real estate portal CommonFloor, says: “Initially, when we quit our jobs and decided to start a business, we had lot of ideas. We started a product called 'Ban Karo', which was banning telemarketing calls. We used to hear a lot of people complaining about unwanted and irritating calls from telemarketers. We built this service basically as a social spam filtering. What exists for Gmail, we built it for the phone.”At that time, the firm got featured in the top 10 mobile companies. “This was when VAS (value added services) was a big thing. We spoke to Vodafone and other network providers, but faced many hurdles. Most telecom firms said our idea would be unviable for their business, and that they would take 90 per cent revenue. We were a young start-up and it was impossible to break through the mobile cartel. So, we decided to drop that business idea,” he says.

However, there was an important learning for the team from this failure. “We realised that an internet-based solution would be the next big thing, and decided to go back and build something for the internet,” says Mangal, adding that start-ups need to take certain measures in their initial stages to fuel the path ahead.

It is also important to have a vision. “The biggest thing I would recommend is to start a company that’s on a mission, not just a company that’s building a nifty product. Solve a real problem that creates real value in the world. Also, be strategic. Find a competitive advantage and build a team which complements the product and has the same vision as you have,” says Mangal.

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