How to survive (Credit- SteamPowered)

Uniquely Indian startup trait – Forced to survive because closing a company is painful

For most Indian entrepreneurs, survival is their unique value proposition. The fact that it is impossible – from a legal, financial and procedural standpoint to “close” your company, declare failure (bankruptcy) and move on, creates for more resilient entrepreneurs than in the US.

Last week at NPC, I had a chance to meet 5 entrepreneurs who I have known for 3-5 years now. 3 of them had raised some money (accelerator programs, angel investors, etc.) and 2 were bootstrapped. All of them had approached me a few years ago with the intent of having me fund their company. I passed on them all for a variety of reasons, but largely because I did not think what they were doing was going to be a large enough company to generate big returns.

The most amazing part to me was that they were *all* still in business. They all survived. They had all found a way to generate revenue, and *all* – everyone of them, claimed they were breaking even, or making a profit.

That’s amazing. 100% survival rate from the list of people I thought would have closed and moved on, if they were in the US for sure.

How to survive (Credit- SteamPowered)
How to survive (Credit- SteamPowered)

To be fair, most of these entrepreneurs would have survived and built a cash-flow business in the US as well, so it is not correct for me to label this as a particularly Indian trait.

Every one of these companies was doing between $150K to $500K in revenue and turning a small profit in some cases after paying for employees & founder’s salary plus expenses.

I am not sure if this is to be filed under “tenacious” entrepreneurs, perseverance, “lost the dream mid-way” or “lost the hunger” founders – which is being very condescending, I know.

I asked why they did not fold, shutdown and start over to find quick growth.

None of them mentioned “difficult to close a company in India” as the reason for not shutting down. All of them were fairly wise in their response – “It takes a long time to build anything meaningful in India, and they got started with revenue development and were now well down the path to give up”.

Now that they had some decent revenues and maybe profit, they were trying to build their base and grow further. Slowly, but surely.

I wonder how many of these will be “cash flow” businesses.

One entrepreneur (a fairly young person at that in his late 20’s) had hired a COO to run the business, while he spent time investing in other companies and try to open new opportunities abroad.

I wonder if this is the new “IT services company” from the 1995-2005 era. They had all built a product or a web service – generated some revenues and were now protecting the cash flow and growing the business at a much more moderate pace.

I wonder though – if shutting down a company in India were much easier, would they have done that mid-way, looked for a new opportunity and moved on?

We will never know, will we?

 

5 thoughts on “Uniquely Indian startup trait – Forced to survive because closing a company is painful”

  1. would disagree. Indian entrepreneurs who have decided to shut down just do so by getting acqui-hired for no money at all or just some signing bonuses for employees and themselves or they just let the company coast off and be a shell company , without any activities.
    If the entrepreneur has come this far to make the company profitable and positive cashflow , then its resilience and determination to make a success , regardless of eventual possible scale and the time taken to get there. They might not build a $100b business in 10 years but are sure enough to get to $200m in 15 years organically or inorganically.
    This is the kind that would never give up, be it India or US.

  2. We don’t really bother about legal issues with closing down the company in India. It’s facing friends family is the hardest thing. Failures doesn’t go well with Indians, not many families or friends welcome failure as learning experience. They stamp and treat you as garbage, its the mind it says you better stay alive than being treated cheaply makes most of the entrepreneurs alive. Everyone needs to evolve, ecosystem, friends, family, government, investors etc etc. Till then entrepreneurs got to find ways to survive doing multiple things keeping their comfort level met so family doesn’t pressure them for not making enough money meeting with their daily needs and hoping someday they’ll crack it to next stage. Only few can go beyond this, its our duty to motivate them and help them.

  3. very true brother

    if u listen to your self its not a problem but if take consideration of society in picture yaa it is but
    i ll tell u one thing society has nothing to do with u and your company if u have the will to dare and move on……………..

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