Should accelerators in India help entrepreneurs “fail fast”?

I was at Delhi for the TIE India Internet Day, last Friday. Over 400 entrepreneurs, investors and startup enthusiasts gathered at the Sheraton in Saket for a day long session. There were 8 startups chosen to pitch at the event and there was an investor connect session as well.

Alok Mittal chaired a panel with 4 of us including 2 VC’s (Shekhar Kirani from Accel and Sanjay Nath from Blume) and 2 Accelerators (Sameer Gugalani from Morpheus and myself).

There were 3 slides that Alok presented about the maturity of the Indian startup scene, which were to serve as a backdrop for our discussions.

One particular slide generated a lot of discussion. The slide showed that 20+% of companies went from one accelerator to another and from one seed round to another without progressing, which indicated that they were “surviving” but were “living dead”.

Alok’s question was if we were not helping our entrepreneurs “fail fast”?

First off, let me state my bias – “I dont like the concept of fail fast”. Absolutely detest it. Whether its in the valley or India, failing fast is way overrated is my opinion and an excuse for folks not willing to spend more time learning about markets and drilling deeper into the problems faced by customers.

I think there are multiple reasons and subtleties to  the question, specifically in India.

First, Indian entrepreneurs dont take (or dont get) enough money in each round at the very early (angel, seed) stages, since the cost of money is too high. If you are giving up 10%+ at the angel and 25-30% at the seed stage, that money is ridiculously expensive. So entrepreneurs tend to think they can get liftoff with very little funds, and that ends up hurting them in the long run since they go back and dip into the same set of investors for another round, when they realize they are not ready for a significant up round.

Second, Indian entrepreneurs pay a lot more for talent, since startups are perceived to be risky  and so it is not uncommon to see talent getting 110% of their salary with some stock options, since the options are considered “worthless” in India. I know there are some folks that are the exception.

Thirdly, the cost of startup failure is fairly high in India already. Failed startup entrepreneurs rarely start again in India. According to our own research, over 50% of failed entrepreneurs, head back to a bigger company after their venture to pay of debts, “settle down” or bow to social pressure and get a fat paycheck.

Given these 3 arguments, I think it is absolutely important that we nurture our entrepreneurs and ensure they stay very lean until they find the product-market fit or liftoff. That takes a long time in India, thanks to fewer early adopters or paying customers.

Bottomline, “failing fast” is not a mantra we should support or promote among Indian startups, is my perspective.

21 thoughts on “Should accelerators in India help entrepreneurs “fail fast”?”

  1. I completely agree with your arguement that failing fast is way too over-rated! Instead of failing fast, start-ups should focus on learning how to adapt fast.

    This becomes way easier, once the start-ups start considering themselves as a business rather than a start-up. This small shift in how they view themselves has a big impact on how they approach the business. Failing fast, suddenly, no longer seems to be an attractive option.

  2. That is an inspiring post Mukund. But tell me one thing. In case I realize that the model I am working on will not work, after 12 months of not earning, and I realize that after 6 months. Which one is better for me?

    The next step of pivoting or starting again depends on my condition after failing. And I guess I will be more likely to take risk after 6 months investment compared to 12 months.

    Let me know the fault in my hypothesis 🙂

  3. That is an inspiring post Mukund.

    But tell me one thing. In case I realize that the model I am working on will not work, after 12 months of not earning, and I realize that after 6 months. Which one is better for me?

    The next step of pivoting or starting again depends on my condition after failing. And I guess I will be more likely to take risk after 6 months investment compared to 12 months.

    Let me know the fault in my hypothesis 🙂

    1. The approach should be to lessen time to validate. 6 months or 12 months are both too long. Adapt fast (Mukesh’s term) is a good strategy. all things being equal 6 months is better than 12, but if after 6 months you are still doing the same thing that you did and 12 months passed, there’s something more fundamentally wrong.

  4. I would tend to agree with you that we need to nurture entrepreneurs, especially in India, given all the reasons you mentioned. IMHO identifying the verticals to focus on initially, bringing in or identifying early adopters and getting them on board (by bringing them together on a common platform or providing referrals, leads etc.) will help early customer validation and thus earlier product-market fit. This is the area where Accelarators can really help enterpreneurs. If these turn out to be negative, then pivot is the next option to consider. If the concept of “failing fast” includes these two then I think it is okay. If not then IMO it is over-rated.

    Disclosure: I am myself grappling with this problem of vertical focus and early adopters.

  5. There is a stage where startup is grappling with some early customers & signals from market about demand, but doesn’t directly fit into what they have built. And startups tend to go down the route of building more features to address these customers. This is where getting into an accelerator should help – to help understand difference between signal & noise and what is most important for long term success and letting go of certain customers / market in early stages. This is better than teaching to fail fast.

    As a first time entrepreneur this is hard to understand. You want to grab every business that comes your way. Your idea would seem like it has widespread application that you can serve the entire world. And we all know the reality.

    This reality check at early stage will save the crucial 3 to 6 months learning curve, before you realise it too late. This reality check is the most important aspect than failing fast, in my perspective.

  6. Refreshing point of view. Too many people seem to give up at the hard juncture with the cover of ‘failing fast’.

    An important question is if the investors are supportive of the business ‘adapting’ in cases where the change is quite drastic. Do they still invest in teams?

  7. Completely agree. If one is solving a real problem rather that riding some trend wave then one needs be patient while continuously evolving.

  8. Thank you Mukund for the thoughts. I agree with you on the fact that to fail fast is definitely not the right way to incubate the Startup ecosystem. I don’t think it is specific to accelerators. I think it extends to the VC-funded companies as well. The pressure of making sales – if not vertically, then horizontally – if shoes don’t sell fast enough, sell Ipads, if Ipads don’t sell, sell water – not sure if this is the right approach to building a brand.

    I feel many funded Startups are not being allowed to build their brands. Rarely in the last 100 years have brands been built over 3-5 years. By not allowing brands to be built, the Startups are failing fast anyway. So why hasten it further?

  9. Great post Mukund! The dynamics of Indian Startup ecosystem is very different!! Failing Fast co-exists with Succeeding Fast- which unfortunately is not the way India operates.

  10. Failing fast is not an option but Fast Adoption is. Critical thing is how the entrepreneurs “listen” to customer signals (as Krish mentioned), avoid the noise, build & launch a product quickly. Also, failure is what the entrepreneur defines at the moment , turns the failure to an opportunity or a success, learns quickly and moves on. Failures (read mistakes) will happen and its good for the ecosystem – VC’s, entrepreneurs, collective wisdom (of course at a cost). I believe most of the failure (from a VC returns perspective) happens because of the lack of a major adoption by the market for a product or a service. Also, sad to say but VC’s do have a herd mentality when it comes to investing which either creates iconic investors (as in PayPal mafia / KPCB/ Khosla), the investment strategy that others follows resulting in lot of failure investments resulting in Failing Fast. Plan B is key for the success of an entrepreneur- “Adapt to Grow, Go with the Flow” are key for success. ~Vijay

  11. Mukund,
    It depends on what you understand by “fail fast” and if you want to rename it to “adapt fast”. I was always of the understanding that failing fast means to recognize small failures in your execution and get to something “that works”. In essence I can say it differently – keep doing your experiments, know early that something will not work and get to another experiment quickly.
    I think this is what a lot of us means when they say “fail fast” and not a big failure and a massive pivot.
    Quoting from wikipedia “Fail-fast systems are usually designed to stop normal operation rather than attempt to continue a possibly flawed process”
    The term has its root in programming where instead of hiding or working around a bug, visible and immediate exception is throw, the goal is to make the entire system more robust.
    Hope I was able to make a few converts 🙂
    http://en.wikipedia.org/wiki/Fail-fast

  12. Hit the nail on the head Mukund. My views exactly after I heard the discussion at IID. Believe it or not this has another impact. 10 Lacs in seed for 7-10%, when you know it isn’t enough to get you VC ready traction spooks a lot of people who could potentially build huge world changing start-ups from entering the scene as well and that hurts the eco-system in general and the quality of start-ups coming out of India.

    Not only are people more expensive, but reliable infra is more expensive too in India. The spend one needs to make on marketing and sales in order to get any traction is also higher and the average deal size is lower. The gestation period is fundamentally longer in India given those dynamics. Failing fast is something one doesn’t need to actively strive for, it just happens automatically in this market.

    In my humble opinion, either one the seed/angel/investor ecosystem needs to realize that the first 10 lacs is just to get the MVP ready and no traction should be expected from it or start giving a larger 50 Lac seed round contingent on milestones that are practical is really the way to go. SO that the entrepreneur is more focused on building and refining the business rather than worrying about running our of money for the first 12-18 months. That’s when we’ll really start solving domestic problems or large problems.

  13. Well, we can call it anything – fail fast/adapt fast – as long as the goals are clear, which should be (a) reduce the failure rates and (b) in the second best case, reduce the time to failure. What we don’t want to see is people throwing in the towel after 3-4 years, or after a lot of cash burn. So, how do we achieve these goals? My contention is that we really need to be looking back and understanding the primary reasons for failure, and see if as an ecosystem we can learn from that. I really don’t see enough this happening. Please correct me if I am wrong.

  14. Isn’t fail fast a nurturing concept? Getting to the point to know if the current MVP has potential or if it should be considered a failure to learn from in the future. Failing doesn’t mean the entrepreneur should close shop and go get a job at Microsoft – it means that the current rendition of their idea is not viable in the marketplace and they need to change it so that they can discover what the viable product is for the problem set and team they have available to them.

    In fact, a shortage of capital would make this even more important – if there is limited capital, churning through bad ideas at a rapid pace is even more important than if there is an abundance of capital. Sometimes too much capital lets entrepreneurs run with bad ideas for way too long.

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