The latest buzz around town is start-ups, with the campaign, Start-up India, enhancing interest in the field. There has been substantial increase in such entrepreneurship being displayed by several people, who have either started afresh immediately after graduating or left corporate jobs to do something more challenging. The range of activities is fairly vast, with Internet-based enterprises being preferred, as they save on floor space, which is expensive. But the history of start-ups is not too encouraging, with several such ventures folding up after three-four years. Therefore, while support from the government in starting such an enterprise is significant, the models need to be sustainable as well to keep the business ticking.
This is where Ashok Soota and SR Gopalan make a difference with their book, Entrepreneurship Simplified, which is a practical guide on how one should go about this job to make a successful start-up a full-fledged enterprise. Both Soota and Gopalan are renowned consultants, who have had experience in such activity in the past and are best suited to provide practical advice. The subtitle of the book, From Idea to IPO, is the crux, as there are separate chapters devoted to the entire chain of activity, from conceptualisation of the idea of the enterprise to the IPO stage when the enterprise is truly a ‘corporate’. Often, we have observed that such entrepreneurs start an enterprise, grow it with the help of venture capitalists and then sell it off after getting a fair valuation. But the logical end should be an IPO when the company is widely held and sustained, which is different from the trend of opportunism.
What Soota and Gopalan do is take us through the ‘what and what not to do’, the ‘why and why not’, the ‘how and how not’ and, lastly, the ‘when and when not’ to give a full guided tour for any potential entrepreneur. Intuitively, if one has cracked these simple principles, the chance of going wrong diminishes. The authors believe that, contrary to popular perception, it is not the young people who succeed, but the more experienced. This is so because experience is needed when handling several issues that go beyond the idea, which is where amateurs falter, as often it is the stage after conceptualisation where the dots do not connect. While the big ‘idea’ is the starting point, it has to be crystal clear who the intended audience is because, finally, any product is meant for the customer. The idea must be convincing enough for the start-up to get funding. There has to be some element of personal money put in as well.
Venture capital is a necessary route, but one must be careful in negotiation, as the terms of engagement have to be clear, including the support beyond money to be procured and management to be shared. This requires professional help, as negotiations here will drive the enterprise forward. The next step is people, and the entrepreneur has to get the right hands who work with a common goal. Hence the mission, vision and value statement are important and must be shared by all. Teamwork is important and ideally they should be made a part of the stock options plan. Often those sharing this vision would take a salary cut and hence have to be rewarded with options.
Next come the strategies, including marketing, and it is here that experience matters, as a newcomer might not be able to relate to the real world with his/her utopian dream. These strategies have to be changed at every stage, which means the first six months, for example, will have a different approach from the next six months when the organisation becomes more mature. There are issues of pricing and competition, too, which can’t be ignored. Branding and publicity become important here.
As the enterprise matures, it can then move towards an IPO, which, the authors believe, is the ultimate goal for any start-up. Once we go in for an IPO, the corporate standards kick in. The other essentials of a company, such as board of directors, board committee, HR policy, regulation, auditing, accounting, etc, fall into place.
Some bits of advice given are interesting and thought-provoking. Those ventures that seek to change the world normally fail. Late-stage entrepreneurs have an advantage here in terms of raising funds, as they are better informed and equipped to access the right people. There are serial entrepreneurs who keep moving from one start-up to another and could be retaining control of all or some of them—and one can make out these trends. Then there are legal issues, which one has to contend with if the originator is competing with the enterprise he has last worked with.
They also have something to say on failure, which is at the other end of success. You might have to shut down forever or make a distress sale. At times, one might be lucky to move out with some net gain. Two reasons why they fail are running out of cash or having a wrong idea where the market does not exist. Hence, it is essential to get the timing tight in terms of idea, market entry, scaling up and changing strategy when needed.
This book is a must-read for all those who have the ambition to start something new. Following the steps, which have been serialised by the authors, will help one follow a pattern. But the dexterity or experience of the person concerned is the distinguishing factor in getting things right. However, all will not succeed even by following these steps. That is the crux, which must be remembered.
Madan Sabnavis is chief economist, CARE Ratings