The thoughts, buzzwords and phrases that come to my mind when I think about the last few years are: global financial meltdown, volatility, uncertainty, a tough macro, decaying governance, feuding institutions, capital availability swinging alternately between a glut and a scarcity, high oil prices, large fiscal deficits, inflation, a slowing China, a US in a recession followed by a fragile recovery, the eurozone in a crisis, a weak employment scenario, a confidence, trust and credibility deficit, a leadership vacuumall of these against the backdrop of a slowing Indian economy. In my working career of over 25 years, the economic and political environment has never seemed more daunting.
And yet there is no dearth of entrepreneurship in India. At two recent entrepreneurship conferencesTiEcon in Delhi and TES in Mumbaithe start-up scene was buzzing. More than a thousand people attended each event. Many of them were recently started entrepreneurs and others aspiring to become entrepreneurs. And almost all of them were well-educated and had the option of working in good companies.
This seems to be a contradiction. In a difficult economic environment, people who have a choice should actually prefer the security of a job in a well-managed company over the uncertainty, pain and sacrifice of a start-up. However, the entrepreneurial ecosystem in India has evolved considerably in the last few yearsa large number of young people are starting companies, there is risk capital that is willing to back them, there are customers who are willing to buy what these entrepreneurs are selling and there are proven success stories and role models of those who have tried it and succeeded. It appears that the ambition and desire of enough young people in India is to pursue a quest that holds more meaning for them than the mere financial security and prestige of a salaried job in a prestigious company. It is cooler to be an entrepreneur and that is what is driving more and more people to do start-ups.
So, what do the prospects look like in 2013 for all these thousands of start-up entrepreneurs around the country
Unfortunately, I have no good news to offer. In fact, I have no news to offer. Given the fact that a year end is an artificial construct I expect more of the same in the next 12 months with political uncertainty being added to the mix, as the Lok Sabha elections are due in 2014.
The environment will remain chaotic and volatile. There are so many moving parts that predictability will remain poor. If there is any good news on the macro it will probably be because of a fortuitous external event such as a decline in oil or commodity prices caused by a further slowdown in Chinas growth or the US becoming less dependent on imported oil, rather than by any well-executed policy plan by the government. However, history tells us that in chaos there is an abundance of entrepreneurial opportunities. And I expect that at least some of the companies that are start-ups today will end up as large successful companies, having taken advantage of precisely those opportunities that todays volatile market offers.
What also will not change are the five fundamentals of prudent entrepreneurship. In times of surplus capital, some venture capitalists and entrepreneurs lose sight of these.
Be frugal: In early stage companies you are usually not in control of your revenues, you are only in control of your costs. Keep costs low till you get some predictability about your revenues. Make sure your costs are below your revenues. This will ensure that your company will survive to see another day. This translates into personal sacrifice and belt tightening, doing more with less, forgetting about financial parity with your batch-mates from B-school who are working for large companies etc. All the things that sound heroic in hindsight after you have succeeded but are very painful when you are actually going through this phase.
Solve an unsolved problem: If you are solving a pain point for your customer, chances are you will get paid for it. To do that, you have to resist the temptation to copy an idea from elsewhere and instead focus on the customer and understand his or her unsolved problems and be the first to solve them. Perhaps you have been in the customers shoes and have felt the pain yourself. What this means is that you have to be a first mover. While being an innovative first-mover carries a risk of failure, being an undifferentiated me too almost guarantees failure.
Sell at an economic price: The customers money is the best moneytry and get some of it. In an age of abundant venture capital we often forget this. Great companies are capital efficientinternal accruals are the best way to fund growth. You need to sell your stuff at a price at which you are making money. If you are unable to do that, it means that you do not have a compelling enough value proposition for the customer.
Build great teams: Great companies are built by high quality teams. Get on board great people who believe in the cause. And share the wealth. There is nothing that motivates good people as much as ownership in the company.
Get lucky: Most successful entrepreneurs will admit that while they worked hard and worked smart, they also benefited from a couple of lucky breaks. If luck is often about being at the right place at the right time, then the message is that you have to be in enough places enough times. Work hard and persist. You will get your breaks.
So stay focused, and good luck for 2013.
The author is the founder of Naukri.com