Failure from an Entrepreneur's Perspective
Aug 07 2012, 12:55 | By SME Mentor
Saumil Majumdar, Co-founder, Edusports
Some ventures were started with a "we will change the world overnight" view - and when things take longer or get tougher, many entrepreneurs and investors decide to pull the plug. Phrases like "opportunity cost", "do not put good money after bad money", "start another venture if this one does not work out" are heard frequently.
In my view, this is a reflection of the entrepreneur's - and the investor's - state of mind, timelines they had set for themselves, the amount of pain they were willing to take to make it a success etc. Not a reflection on the inherent viability of the business itself. Many of these businesses shut down because the entrepreneur and the investors were not willing to give it the time required to scale.
Why are start ups forced to shut down?
Businesses in the Indian market take 10-12 years to establish themselves. Not 3-5 years that is the typical horizon most investors will give an entrepreneur. And due to this structural mis-match, we see businesses being forced to shut down, sell, go for an IPO etc. Running a small - but profitable - business is seen as a failure. Growth is seen as the only panacea to all issues.
Many of these are US Silicon Valley, high-technology market-based models that are being forced onto Indian markets - and onto businesses that are anything but high-tech.
The emotional and financial pain that entrepreneurs face due to this can be reduced if the structure of the early-stage ecosystem adapts to the reality of the Indian market i.e. businesses take 10-12 years to mature. There should be 15 year funds if not, ideally, open-ended funds. Not 7-10 year horizons.
My opinion on how to avoid failure
Our education system does not prepare us well for handling failure - and there is a tendency in society to confuse "My venture failed" with "I am a failure". The entrepreneur needs to be clear about the difference and if the immediate friends/family circle reinforces the difference, it definitely helps.
In my view, the best way to avoid this situation is to ensure that as an entrepreneur, you have an open-ended time horizon for the venture. Because good things do take time to make.
The class of capital you choose should be as per the stage of your business. If you are in the exploratory stage, either don't raise funds - or raise small amounts from friends and family.
Once you have identified the space, got an early pilot done - and the model is proven, only then
should you involve VCs. Till then, just keep tinkering with the business model, the product lines, service options till you crack the code.
Failure is an extremely intense experience - and not something that most of us have experienced. Not so starkly, atleast. It takes time to distinguish between the failed venture and yourself as a failure. The former is the reality. Not the latter. The nature of startups has failure embedded in it. But all of us think that we are the cool ones - and the 95% mortality rate applies to others.
QSupport and its shut down
When things start getting tough, everyone starts thinking of themselves. Investors have other portfolio companies to manage, new CEOs have other career options, team has other jobs etc. When things get tough, only the founder is "all in" - as they say in poker. Everyone else has hedges against this bet.
From an external perspective, we could not raise funding as the market crashed in 2001 - but if I had stayed around, we could have survived - and come out stronger.
I think the real issue was internal. Not external funding. You can always cut costs, scale down and then grow again once the market recovers - unless of course, you get carried away by "opportunity cost" "no point in just hanging around" and related ridiculous advice that one gets very often. I did get carried away then!
What did I do after the company shut down?
I took a month long break. Drove around India. Decided to take up a job in the Silicon Valley as I wanted to get away from the entire QSupport context and also build my own network in the technology space.
What did I learn?
The regret keeps coming back - and in my current venture, I have applied the single most important lesson I learnt through my failed venture: you fail only when you give up. So...don't.
Enjoy the ride!
Saumil Majmudar: An entrepreneur for 14 years, Saumil cut his entrepreneurial teeth starting & building Learn@Home (personalized computer training) in 1998 and then QSupport (one of India's first remote tech support business) in 1999. In 2003, he founded SportzVillage, a facility to help children have a good after-school sports experience and in 2009 created EduSports- India's first school sports/PE enterprise. Saumil has a deep understanding and personal experience about the various facets of creating a company - fund raising, hiring talent, managing rapid growth and perhaps most importantly, dealing with failure. Recently, Saumil was listed in the Top 50 Leaders Changing Indian Education by Education World http://in.linkedin.com/in/saumil
About EduSports: EduSports (www.edusports.in) is India's first in-school, structured PE & School Sports Program backed by the alumni of IIT, IIM, NIS, LNCPE and Stanford. Operating in 50+ cities all over India- Currently LIVE in 200+ leading schools, the program currently covers over 1,50,000 children, 6000 teachers and 60,000 parents. www.edusports.in has videos, picture & other program details.
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