Funding, funding everywhere but not a penny to invest in YOUR startup! Well, that’s what you feel when you are running a startup and quickly running out of cash. Several startups face this problem – they start out with enthusiasm and funding (self, family, friends or angel) to build out a perfect business, but end up spending up too much, too soon.
Funny thing about building a startup is that the money, you assume, will suffice till the time you get funding for your startup, is NEVER enough. Well more often than not founders need to take the harsh decisions to prematurely kill the startup. More recently startups have realized that pivoting your startup can be the way you can save it! But pivoting isn’t easy if you have already burnt a lot of cash. The founders tend to stick around with a broken model even when they know it isn’t going anywhere, because they have investor money backing it and are too scared to put their hand up and say that this isn’t working.
In the enthusiastic race to make the game changing product / business, startups tend to splurge investor money and this enthusiasm is reciprocated by the investor to build the next billion dollar valuation. Ultimately too much money is burnt too fast and before one realizes what is broken and how it can be fixed – the business is stuck between difficult choices of letting it go or changing the path.
Indian startup ecosystem is gearing up for it’s next level. From being a small kid on the block we are getting to the teenage phase. This phase does bring a lot of excitement and enthusiasm along with its share of problems. There are certain levels of caution that can help this ecosystem to thrive and make it strong to breed strong startups that will stay for long.
There are few areas which startups can keep a check on for a healthy future:-
- Be microscopic in approach: Try to prove your business model first e.g. target your locality before you move on to the city then a larger geography.
- Make money: You know what is cooler than 10,000 free users? 100 paying customers! There is nothing sweeter than making profits before you expand.
- Be frugal: This stands true even when you make it big with your venture. Getting funding isn’t equal to winning a lottery ticket. The more frugal you are with your investor’s money the more confidence you will gain from the community.
- Be under staffed: Best part of working in a startup is you get to do more than what is defined in your profile – hire people who agree to this statement. Multi-tasking by your team members is an important ingredient to success.
- Don’t be ashamed: To ask for discounts, to ask for longer credit period, to order vada pavs instead of pizzas for your team when they working late, to take pay cuts, to fix the smallest problem on your own.
- Keep your word: Never break the trust of your team, customer or vendor. If you cannot keep your word because of some reason things didn’t go as per plan – make sure you communicate. And do not forget to make up for it later.
I can be guilty of being called as OLD SCHOOL with my thoughts. I am not against scale and big valuations, but I prefer to see money make more money rather than funding attracting more funding. After all isn’t MAKING MONEY rule #1 for a successful business even if it is a startup.
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About the author:
Deep Malhotra is the Founder and Managing Partner of Gemini New Media Ventures LLP and Gemideals.com. Deep has over 13 years of entrepreneurial and startup experience in working & building companies like Google, Myspace.com, rediff.com and Onmag.com. Feel free to write with your thoughts and opinions on deep@imgemini.com or follow on Twitter @deepmalhotra
Anamika Joshi
Deep I totally agree with your points… We used to order samosas and had chai as part of celebrations which we later graduated to pizzas and cold drinks.. and it did no good… i prefer to stick with samosas in future..
I always used to discuss with my co-founder that we were doing our best when we were 4 in number rather than when we turned into 10. And surprisingly increase in team member started affecting our quality big time.. have learned my lessons regarding selection, delegation and clarity of roles – which play a key role in ensuring your growth… it’s time for me to use all of these in what i plan to do next!
Keep writing.. keep sharing!!
Alok Rodinhood Kejriwal
You are not old school.
You are REAL SCHOOL.
Until 1997, there was no VC
So, how did the companies before 1997 ever get created??!! Coke – GE – Reliance?!!!
Deep Malhotra
thanks anamika glad u liked the post. people are the most important aspect in building a company – especially in the early stages. best of luck for ur next venture..do share how it is shaping up..
Deep Malhotra
Hey Alok – good to know u agree with the thoughts! Great companies are built by making money & putting that money back in the business to grow. When we look beyond the glamour of funding one thing that really matters in business is making money..that was in the DNA of companies like GE – Coke – Reliance in its time.
Hardik Khanna
I started my coaching class being as thrifty as possible..
1. Bought chairs with tables hooked to the arm, from Quikr. New cost Rs.1200 , I got it for Rs.400.
2. Started (and still continue) my coaching in a garage.
3. Started with Private coaching as it needs less space.
4. Learnt to not to go through broker when renting out a place. You end saving one month rental (paid as brokerage). Instead just ask the watchmen in the building where you find a shuttered garage.
5. Rented out AC @ Rs.500/month
6. Hired teachers at revenue share , so reduced fixed cost (monthly salary) and made it variable (fees share).
7. Did not go for a white board; instead opted for black board.
Reason- White board requires markers which cost Rs.40 – life 1 week (maximum)
Black board requires chalk cost Rs. 40 for 100 chalks – life 3 months
8. Saved on test papers. Instead of xeroxing/printing test papers asked my students to maintain a separate 200 pgs book to write the test. This also helps in keeping a record of all their test performance.
9. Saved cost on office boy. Had one for few months, then thought I am better than him on doing his job 🙂 (No job is small). My class was like my home – never felt ashamed of cleaning it myself.
10. My coaching class does not have a wooden door. It costs Rs.2000 for a second hand and installing the same.
My Rs.500 flex banner worked wonders- it acts as a door and doubles up as a advertisement.
I am proud to be thrifty 🙂
Business has taught me to how save every penny and earn every penny !
It’s funny.. I remember arguing with a broker to return my Rs.200. It was more about winning my hard earned money. It was about not being cheated or fooled . Think I was just trying to prove something to myself… that I CAN.
Anamika Joshi
Hardik, I think your wonderful comment deserves to be a post in itself – Best wishes to you!!
Hardik Khanna
Surely will post one 🙂
Thanks
Ketan Warikoo
“You know what is cooler than 10,000 free users? 100 paying customers! There is nothing sweeter than making profits before you expand. “
Sounds very nice that you were able to make 100 people part with their money because your product impressed them. What happens when a competitor launches the same product/service for free and takes your 100 paying customers as well as pulling in 10000 free ones? Just food for thought.
Naveen Bachwani
Great writeup, Deep! Startups would be well advised to choose the path of conservatism when it comes to managing spends. However, there is also a fine line between that and making frugality an obstacle to growth.
My two cents… What matters most is what you spend on. If you’re sowing the seeds for a better tomorrow, don’t shy away from spending. But don’t waste monies on operating expenses, if you can help it…
Mayank Chandan
Deep,
Nicely written. I really liked the 1st point – “Be microscopic in approach“. Today every one wants to think big but barely any one want to go at ground level and study the feasibility of their idea.
Unless you are lean and self dependent, values of creativity and innovation are intact and drives your business in getting more customers.
Keep writing!!!
Prakash B Pimpale
Yes. Your experiences need to be shared. Such a micro level management! great!