The reason why #startups fail in India is different from why they fail in #silicon valley

I read the interview with Steve Hogan yesterday about the reason for failed startups. Take a look at the #1 reason why startups fail according to him.

Hogan says, is that they’re sole founders without a partner. “That is the single biggest indicator of why they got in trouble,” he says, adding that it’s especially common for sole first-time founders to fail.

Sole founders.

#2 was lack of customer validation and #3 was “company ran out of time” – or money.

From our India data, I can tell you that among technology startups, solo founders make up less than 35% of the companies. We track now in our database about 15,000+ entities.

If you look at the reported closure rate, they are not significantly different from entities with multiple founders.

In fact in my own personal experience with 33 startups that I have closely observed in the last 12 months at the accelerator, the #1 reason for startups to close in India has been mis-alignment of founders.

Let me give you some examples that I am not sure are uniquely Indian, but occur in India a lot more than in the valley.

First was a team of founders working on a B2B marketplace.

Two founders we interviewed and accepted were related, but chose not to let us know about it. In the first 2 weeks at the accelerator, in multiple meetings they would often contradict each other’s views of their target customer’s pain point. One founder was a self-appointed “domain expert” and another was the “technical founder”.

The domain expert was an expert primarily because of the fact that she was not technical. She did not really have a background in the field, and neither was she all that experienced dealing with the potential customers. They had both stumbled into the problem while they were working in their previous jobs that were not related to their startup. After the first few weeks of multiple disagreements on the direction of the product, they chose to “keep their relationship intact” than to work on their startup.

Second is a team of strong technical founders.

Both these founders were among the smartest hackers I have met in India. Pound for pound they would be among the best developer teams you have ever worked with. They had worked with each other for over 5 years at a large MNC and came highly recommended. Their pedigree was excellent as well.

The problem they were addressing was real and fairly technical, and you were compelled to go with the team just given their background and the problem they were solving. The trouble was their answer to every customer problem was build more code. They were loathe to talk to real customers and after multiple fits and starts decided to split a few months ago. They still remain friends, but chose not to work on their startup.

Third was a strong team of founders, who had worked together for a year at another project.

They were also folks with excellent backgrounds, great Ivy league college degrees and were solving a real problem that many consumers had in India.

After a year of working together, building what I considered a good team of 5-10 folks and an alpha, then beta product, they chose to go separate ways. In discussions with both founders after the split, each blamed the other for not “delivering”. One person was the designated CTO and the other was CEO and chief sales guy. They did close a round of funding, but the product went through multiple fits and starts. The problem they were solving was real and even I was an early user of the product.

In all three cases, I found that having the co-founder was the big part of the problem.

Lack of communication, inability to stick through tough times and different visions for the company / product were the biggest causes for failure.

I’d like to understand from you what about our culture, our maturity as a startup republic and our progress with technology makes these problems more prominent in India.

 

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32 thoughts on “The reason why #startups fail in India is different from why they fail in #silicon valley”

  1. Sounds like most of these cases were failure of leadership. Co-founder or not, you have to bring your team along and make decisions everyone buys into. I would have characterized these problems as lack of maturity and business sense compounded by or precipitated by the co-founder calling it out. Thoughts?

      1. While I agree that research like education is absolutely necessary, I don’t agree that founder problems would be resolved just by that. Unlike abroad,
        1. the perception in India – to be seen as a young CEO/Entrepreneur/Boss/Businessman sometimes far exceeds the amount of work people are willing to put in because they simply don’t understand what it takes to be any of the above.
        2. Ego – 2 or more partners who share the same ambition to be boss will at some point have an ego clash.
        3. Lack of Role Designation – in Indian start-ups, most entrepreneurs fail to divide work appropriately, or set deliverable’s that need to be fulfilled from each end with certain set of rules in case a partner fails.
        4. Inability to understand failure – while most people start up with great ideas, they do not expect to fail. So when failure strikes more than once, most start ups doubt the viability of the idea and the passion dims.
        5. Impatient – want to ape the Grand American Success story highly glamorized and sold in 90 minutes via Hollywood Blockbusters, they fail to understand that it takes years of hard work to be a successful start-up.
        6. They believe funding is the final step to success and not the first step to actual serious work- this is one of the key issues for a start up.
        7. Books & References – most people fail to read and learn and believe its easier to do this on the job. When you don’t have funding or if you have minimum funding, or even role icons like Zuckerberg – the easiest ways to minimize errors is to read and learn.

        I’ve worked with 4 startups – 2 successful, 1 failed, 1 yet to be seen. And I think if you genuinely believe in your idea and if people who invest in ideas have shown interest in it and your research validates the need for your product or service, the least one can do is work hard towards the goal. If a partner quits, another can take the mantle. People are dispensable, great ideas aren’t.

  2. As a Single Founder, I’ve found it to be a lonely task, convincing investors and stakeholders that I can “make it happen”.. The pros I’ve found are that I can make decisions quicker, have a clear roadmap I can follow and with “hired” core team, if I can give them single / early double digit equity, they are happy to follow my lead while offering great suggestions on tactics. Ofcourse this can backfire if I am too arrogant and/or not flexible enough with my gameplan. Since I run a real-world offline business that I am tech-enabling I find that my tech founder needs not be a co-founder. Another issue with a single founder is since the passion largely comes from me to motivate everyone else, there is rarely a time I find someone who wants to share equity without a salary. So even if I want a co-founder I can bounce thoughts off, the fact that I started the business becomes reason enough for people to become “salaried” as opposed to “partners”..

    As for failure, I’m still in the process of building the business so time will tell.

    All this IMHO.

    Thanks,
    Pranay

  3. Most definitely agree with the points made by both of you experienced folks.
    I personally feel with the present GenY wave of having a ‘startup’; the decision of getting a co founder is driven complementary skill sets. But the challenge comes for teams where folks choose to ignore the difficult conversations – for multitude of reasons. Sometimes, getting the work done is more important and sometimes, getting some one to share the coding is more important.
    Essentially, often looked down upon – but having the most critical conversations early in the product days – maybe even before the 1st line of coding goes – by my personal experience is most healthy.

  4. That’s an interesting perspective. Wonder how you feel about #3 “company ran out of time – or money”. Is that more so the case in India given that seed rounds are relatively small and cost an arm and a leg. Do you feel that investors leave enough runway for the company to mature?

    Thought prompted by this article by Francis Pedraza – https://medium.com/what-i-learned-building/16f6de3b7512

  5. So are you open to single founders then? Since it seems to have similar chances of success.

  6. I can totally relate. But I think in India, ‘society’ or societal make-up is a big big factor.Bigger than what I had anticipated(Esp with co-founders). You need to first get ‘sorted’, to the new lifestyle(as opposed to a decent paycheck, house, mobile and travel bills paid for, like in my case) and figure out ways for people to ‘sort’ themselves out, using your company as a vehicle to fast track their learning to get there. Everyone has their own agenda. So that needs to be addressed. Its nearing 3 years now for us at EveryCrave. I’ve always felt that the product will/should change, customers will certainly change, even the company/team might change, but as people, and as a ‘leader’, it is important to stress on self growth for each individual, and build the company around your people, and their skills/ambitions. Make them understand how their skills are being leveraged by being part of a team, and more importantly, THIS TEAM. Build it like you would build a rock band, or a sports team. Have fun, play hard. But not everyone has the appetite to go thru months/years of being ‘broke’, believing completely that when u DO ‘succeed’, all the years of toil will seem worth it. I think spirituality/being religious strangely helps. As u well know, u need to be inspired at a slightly different level to survive in this jungle, let alone succeed. Also, I think enthusiasm. Sheer(I would say almost BLIND) enthusiasm beats sales skills/tech and perhaps even similar-visioned founders. It has to be taken to a level where it is beyond creating a ‘billion dollar company’. Or ‘Profit’. While the ‘money’ aspect can take u only so far, starting up/ running a small business has to be seen as an education degree, a career and a ‘spiritual’ lifestyle, rolled into one. You have to genuinely love ur people, and vice versa. It is like love actually. You cant force it. It has to happen i guess! My 0.02$.

  7. Mohan , I posted some inputs on Steve’s post http://pandodaily.com/2013/07/23/what-do-failed-startups-have-in-common/

    In continuation here let me share my experience of living a life of founder. I run 2 companies 1st one a software services company since 2002 & 2nd one a digital marketing company a startup this year. A need for partner or employee with ownership is very vital to startups & SME businesses.
    My journey as sole owner of business got a flavor of partnership in 2011 when my wife joined my business leaving her well settled job with reputed IT company.
    Goals in my mind were :
    • I need to scale team
    • I need to have a trust worthy 2nd in command
    • I can concentrate on business sales

    The decision of having my wife as co-founder was more from mitigating financial risk of paying a salary to COO. It was a right call even as we waited for 9 months to ensure that COO finds her right foot in business which i would have never waited for a partner or salaried employee.

    But still i don’t encourage to get married for finding a partner , you can hunt them easily over your business networkings. lols 🙂

    Now another challenge is ready for us – Money in business or Money generated from Sales has become vital to sustain. So a big question comes to my mind to find another co-founder – choice could be an Investor or CSO.

    Decision in business could be both or any one of it. All of these would be considered as vital decisions for making of a next stage company. So the hunt will be on for ever….& thats real fun of life being in journey & passing by milestones.

    Regards
    Yogesh Huja, MD & Founder
    Web: http://www.swaransoft.com

  8. In my learning’s with Single founders they are passionate and lack mostly in business focus. But this can be easily managed if you understand your weakness. If Co-founders need to be successful they need to have a shared vision and be willing to change it on customer validations if that’s not working for them. How fast they adopt to change (Most of the cases they don’t) is the prime element of sucess whether its a single founder or multiple founders. Why do they get along is another reason which has to be drilled deep, which is not easy to find. I believe in India we will have Single founders than co-founders it because of our culture.

  9. @Mukund you’ve made the point loud and clear. And its global. I am doing my second venture, we are amazingly lucky to be part of the Intel & UC Berkeley Accelerator, which is taking us through rigorous ‘customer discovery and lean startup’ methodology. And when I say rigorous, I mean it.

    I say we are lucky, because otherwise at “Collisionable” (the venture), we would not have spent as much time talking to real customers and understanding their pain points. Also clearing our hypothesis’s with them, rather than writing code and doing what we think is right.

    This is what most startups, fail doing. Accelerators in India need to do help startups understand the value of “going out of the building”.

  10. The concept of ‘teams winning’ is not new. And the rules of that haven’t changed over centuries. Brilliant writeup Mukund sir. Your posts are just undeletable. 🙂

  11. Mukund – IMHO the biggest issue isn’t about single founder or even founder mismatch. The bigger issue is understanding ‘real’ customer pain point, finding a laser sharp focus group within the large potential customer segment, understanding the problem, and communicating the value proposition to them. Most of the founders I come across, have hardly spoken to more than handful of real customers to understand the problem deeper.

    Issue is their contempt for ‘customer’ skills. Customer skills, I broadly mean as skills to dig deep into customer problem, his psyche, processes he follows, alternate methods/solutions used to solve the problem, what ‘language’ he understands etc.

    It might sound generalisation, but most founders coming with deeper tech skills come with inversely proportional ‘customer’ skills. And then they take co-founders with lesser tech skills – because they ‘sounds’ like having better ‘customer’ skills.

    So the issue is not founder mismatch – but the appreciating the need for better ‘customer’ skills in the founding team.

    1. I wont disagree with you Kanchan, but the problem you talk about “customer validation” is a global one. It is not very much different in the valley. What I have seen here in India is specific to more two or more founder teams failing more than the same in the valley.

  12. When i read your post i assume you come across many people who are “Fantasizing Entrepreneurship” without they even being aware of it; the “urge to do something of their own” is overpowering the sensation of PAIN; which is some sense, interesting, because they are willing to go through the pain, to experience virtual world of liberation.

    Approach One – Simplistic
    Problem the way i see. (because i face the problem or my circle faces similar problems, or this is a basic problem consumer/customer/client face etc) // Pure Luck if you succeed.//

    Approach Two – Little Complex
    Problem the way consumer sees – Here “I’m not the consumer/customer/client // however the dilemma, How do we know problems the way consumer sees. Does consumer/customer/client realize they have a problem? // The one who works hard, lucks favor the effort.//

    Discover…Pivot…Pivot…Pivot…Aahha moment, we found our market/segment/target…Built the team…etc…

    Discovery – Self Awareness, Awareness of the Reality, Awareness of Motivation/Intention of oneself and the co-founder if any

    Pivot – Founder problems (if everything went well at the discovery phase)
    Pivot – ****ing painful, testing of motivation/patience and coming to terms with reality.
    Pivot – Hope

    Final words –

    Indian Investors are not driven by “Greed” and hence they overlook ideas as silly as “Twitter” or “Facebook” // a Greedy Investor will figure out a way to make money from silly ideas like mentioned above. A Greedy investor knows, everything can be sold, Period.

  13. Could be the cultural background that makes the difference. We easily get hurt when some one criticize us or point out when we are wrong. Then ego steps in and look at each other suspiciously, then gradually part away. It is worst when the founders are only two where there is no referee to come in between when difference of opinion takes place. Never attempt for a start up unless we are prepared to take up criticism positively and consider it as a learning process.. Considering our cultural back ground, how about taking a short course on “Communication and Relationship Management” before going for a partnership business !! That is a basic requirement in a business any way.

  14. More often than not, people tend to see startups as lottery tickets. With that mentality.. you can guess the odds of a winner 😐

    Apart from this general notion, IMO, there are somethings the “ecosystem” lacks here in India :
    For a B2C startup:
    1. Lack of marketing avenues that are startup friendly. Any B2C product in India cannot have millions of users unless they spend millions on advertising.
    2. Seed population crisis : Unlike US, where universities are not only hot beds for startups, they are also amazing testing grounds for startups. I have not come across a survey that gives me number of “new” app downloads made by IITs / NITs / local university students. Number of smart phone users in these universities etc.. Unfortunately in India, there is no easy way of getting initial users.

    For a B2B :
    1. Big company laziness : There are hardly a few companies that are willing to talk to startups. Companies tend to “innovate” only if they are pushed to / forced to. There is no single “network” / avenue where startups can identify potential clients who can sign-a-deal (not just say hmm-this-is-needed).
    2. Service oriented : We are all service oriented. The general culture is not about building cool products and helping end users. Its “let-me-do-it-if-someone-pays-me”.

    All in all, creating a product startup is way too easy than “running” one. Thats why you see failures.

  15. Fear of speaking to one’s customers (for potential criticism), and also as you mentioned – coding more and more, as a potential solution to all problems would be the biggest reason for failure according to me. If you speak to your customers, and figure out what the problems are with your product, the founders will find it much easier to align on strategy.

  16. Great post Mukund. While my experience has been in different order, the top 3 is definitely between a) founding team, b) product-market validation c) running out of gas.

  17. Interesting Article Mukund. I agree with some of the points mentioned earlier. My two cents
    1) Most of the startup guys are reluctant to take the market feedback of the idea before it becomes a startup. It could be cultural or it could be process but it still doesn’t happen in most of the cases. This results in working on ideas which are not worth pursuing by market/investors etc. This leaves the hurt burn to all involved in the process, hence difficult to find cofounders/investors/team etc
    2) Statup guys approach the idea with the Funding as key milestone and once it reaches the whole attitude changes to “I know it all”. Which is what causes lot of friction inside and outside.
    3) As Noam mentioned in the “Founder’s Dilemma”, 3Rs(responsibilities, roles and rewards) are allocated/agreed without actual considering the competencies required now and later. Hence the issues keep coming up as and when once progresses.

    Niranjan

  18. Hi Mukund,
    Very insightfull and inspiring findings for solo founders in India. Though most successfull startups in the co-founder setup have deep understanding of each others strengths and weaknesses both on a professional and personal level. This is one of the biggest strengths that keeps them afloat in every turbulent situation in the startup phase, but again such combinations are rare and the buddy factor plays a major role. These are my views. While solo founders is a lonely business, the smooth functioning is one of the biggest plus points. However one needs to be highly driven, loads of positive energy and temperament
    Lean operations and dont run out of money.

  19. Reading the post and all the comments, everything feels so personal!! I’m one of the two founders of an e-commerce start-up. Me and my business partner did go thru some challenges after a few months of working in tandem.. Finally my partner decided to give up. So, now I’m feeling like a single founder..
    There is also level of trust and expectation match / mismatch that contributes to all this. Founders may have same vision. But, how you get there matters and I feel, in many cases, this brings difference of opinions. Depending on how serious these differences get, business partnerships make or break.

    BTW, me and my co-founder know each other for 25yrs (as classmates and friends) and yet, couldn’t partner in business.

    1. Hi Srihari,
      You are not the only one. Count me also in this group. Failed once with class mate and thick friend and again with a close relative. In the end it is like a failed love marriage. You lost a good relationship as well as money and time for ever. . Then we learned hard way that , there must be another way of doing business. Thanks to people like Mukund so that we gat a platform to share our experience with others to not to repeat the mistakes that we did.

      Unfortunately almost 60% of the start ups are formed in India by people with long standing relationship, rather than technically matched technocrats. Here you may see the difference of background found with Indian partners and Silicon valley partners

      May be instead of just two partners, a group of three or more could work better, as there will be a third person in the team to impartially observe and pacify when a difference of opinion creep up between two. Well , mutual respect, clear cut defined responsibility, openness, transparency, volunteer to shoulder responsibility etc will enhance bonding and will take the team long way.

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