Israel produces more startup companies than large, peaceful, and stable nations such as Japan, China, India, Korea and Canada, says the author.
By Maj. Sunil Shetty, SM (retd), Founder & CEO - AskMentor
Ever wondered how Israel turned into the most successful startup nation on this planet?
Consider this; since its formation, this young nation has been in a state of conflict, and it's eight million population has had "no natural resource" to back them.
And yet, Israel "produces more startup companies than large, peaceful, and stable nations such as Japan, China, India, Korea, Canada, and the United Kingdom."
In 2009, Dan Senor and Saul Singer published a book titled "Start-up Nation: The Story of Israel's Economic Miracle."
In the book; The authors argue that the culture of the Israel Defence Forces (IDF) is a major factor for Israel's economic growth.
They further explain that the IDF service, which is mandatory for most young Israelis, "provides potential entrepreneurs with the opportunities to develop a wide array of skills and contacts."
Oren Kaplan and Yuval Kaplan, veterans of IDF, started their FinTech venture -"Sharing Alpha", a startup that is into the rating of fund managers.
According to the co-founders, their startups is "the world's largest fund rating platform" going by "the number of fund analysts contributing to the rating system."
According to Oren, the platform has over 7000 ratings created by over 1,200 vetted fund professionals from 55 different countries.
Kaplan adds 'Sharing Alpha' generated this level of "global traction without raising investments" or undertaking massive cash burn that most Fintech startups commit.
Oren says, "it is important that entrepreneurs delay funds raising as much as possible by innovating new ways to reach out to their target group and to scale up."
I spoke to elder Kaplan to understand how did the Kaplan brothers built and scaled up their venture - 'Sharing Alpha' without raising funds from an external source.
Lessons on how to build and scale up a Fintech startup on shoestring budget.
1. Find Co-founders who complement each other:
Startups can delay the initial fundraising by bringing together cofounders who complement each other, says Kaplan.
He further explains having in-house capabilities such as product development, marketing, technology or domain expertise spread among cofounders means ventures don't have to hire or outsourcing work.
Building a team with a variety of skills results in saving on cost and thereby startups can be bootstrap for an extended period.
The Kaplan brothers among themselves manage the two critical departments; Oren has over 20 years of experience in the finance world, and Yuval takes care of the technology.
Thus, Kaplan brothers could "implement their idea most cost-effective way."
It is a known fact that the startups launch with a beta product and then with time and demand undertake changes to their product or services.
According to Oren, in FinTech, the upgradations to the platform are rapid. Thus not having an in-house capability to execute the development can spiral the cost out of control.
So the thumb rule is to "find a co-founder who is not only easy to get along with but more importantly someone who can compliment you with the know-how and experience."
2. Build a composite team of young & seasoned professionals:
In India, most first-time entrepreneurs don't look beyond their immediate group while picking up co-founders this leads to most startups having team members of same age group or experience.
Such grouping of people limits the experience and diversification among founders.
Thus, it is critical that during early stage; startup teams comprise of seasoned entrepreneurs or professionals who bring in the much-needed expertise and professional contacts.
According to Oren most "young entrepreneurs might find it difficult to sustain without receiving regular salaries", but that may "not be the case for seasoned entrepreneurs" so there is also a financial advantage in having seasoned professional as part of a startup team.
3. Pick the right social media to connect with customers:
Though most young entrepreneurs are good at creating a presence on social media however it is crucial to identify the right platform that will help in reaching out to the targeted customer base.
Sharing Alpha has built a follower base of over "23,000 professionals on Linkedin" where most of its core customers or users are present.
4. Getting early traction critical is the key to the survival of a venture:
According to Oren, "many companies don't fail because they could not manage to develop a product;" they fail because they cannot succeed in attracting "enough traction to their website or enough people were interested in their product."
He further adds, founders are most comfortable building or refining their product or service than to go out and market their startup.
"A lot of developers feel more comfortable writing codes and developing new features on their website or their products and loss sight of or are less comfortable with speaking to people marketing their product - and getting a feedback from end users."
5. Barter with strategy partners:
For early-stage startups, the age-old barter system of exchanging services or goods can be an excellent survival, traction, and outreach tool.
Kaplan brothers reached out to media and event management companies who had synergy with their business and offered them their services for using the respective platforms.
According to Oren, in such partnership, "the investment is not in the form of money rather in the form of time, and this becomes a win-win for all. Such strategic partnership are "much more valuable than asking for funding."
Many startups fail because they don't generate enough traction in the early stage.
Entrepreneurs can jump-start customer interest by leveraging strategic tie-ups, by tapping into the right social media and by developing innovative methods to market their products and services.(The author is founder CEO of AskMentor. Views are personal.)