Entrepreneurship is one of the hottest words in India Inc today. Given the steady rise of the innovation economy in the last few years and the Government’s push for ‘India’s Techade’ in the years ahead, every young person today either looks up to entrepreneurs or wants to be one. But it isn’t a cakewalk.
It’s hard and there are more failures than successes along the way, Sougata Ray, Professor of Strategy & Entrepreneurship Practice at ISB, reminded an august audience at BT Mindrush in Mumbai on Wednesday. While speaking at the flagship annual event, Ray said, “Entrepreneurship is very contextual and every new enterprise has more potential to fail than succeed.”
Additionally, “Entrepreneurs have to manage conflict on a daily basis beyond complying with the laws.”
Why do new enterprises fail? Sharing ISB’s research findings from over 200 start-ups globally, Ray revealed, “Not meeting customer expectations is the biggest reason startups fail.”
There are other factors too such as product, cost, legal conflicts, high cash-burn, poor unit economics, intense competition, below-target net sales and so on, according to the study.
On the other hand, what makes new ventures succeed is the alignment of 5 essential factors - 1) Timing 2) Team and execution 3) Idea 4) Business model and 5) Funding
Even then, entrepreneurs need to ask themselves a bunch of questions before starting up. “Is there a problem worth solving? That’s the purpose of an entrepreneur,” Ray explained.
Founders also need to find out - “Do customers want the solution? Can they build the solution? Can they build a profitable business out of the solution? And can they sustainably grow their business?,” he added.
According to Prof. Ray, while most entrepreneurs are naturally attached to their own ideas that go on to become companies, they should also know “when to pull the plug”. “Creation of a new venture is not a linear thing. It includes a lot of fooling around, experimentation, and failing. And entrepreneurs should also have the courage to pull the plug,” he stated.
Reports suggest that despite India being the world’s third-largest startup economy, over 2,000 startups failed in 2022 due to various challenges from poor business models to lack of profitability. “Ultimately, all innovation should be aligned to the market reality,” Ray added.