By Saurabh Saxena

The common narrative around the success or failure of startups is much like what we have seen and heard in stock markets over the past many decades. Successes get a loudspeaker, while failures fade into oblivion with hardly anyone noticing. While the analogy sounds about right, there is one big difference — we don’t talk about failures enough. Every failed startup costs hundreds of jobs, if not more, consumes valuable resources and ends up in the shattered dreams of an aspiring entrepreneur.

In a certain obvious way, understanding the reasons for failure can also become a roadmap to success. What I am writing here comes from my experience of trying to build a bunch of startups in 2014-15, followed by the success we saw with InterviewBit and Scaler. Let’s dig in. The chances of success improve dramatically when we build a purpose-driven organisation where financial outcomes are welcome and necessary to sustain growth. Once the purpose is clear, converting it into a killer product (or service) that is backed by a motivated team will be relatively easy.

The global experiences of startups also teach us the value of raising the right amount of funds at the right time to decide whether the organisation can survive teething challenges. What is equally important, if not more, is to be wise and thoughtful of how we spend those funds. Too many good ideas have died because entrepreneurs splurged too much money on things that don’t matter, such as fancy offices, over-the-top employee perks, etc. The pragmatist in me always seeks ways to conserve cash while figuring out where we get the best bang for the buck.

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Scaling up the business is only secondary to the soundness of the business itself. It comes in two parts – identifying a challenge that is big enough to warrant all the blood, toil and tears and creating a business model that will provide a sustainable solution to a challenge is far more important than rushing to acquire customers.

At the risk of sounding like a naïve idealist, I will even say that making big bucks is not as important as the passion for what we do. That is the fuel that will keep us going even on bad days when one is tempted to give up and accept failure. To give an example closest to my heart, we saw the skill gaps in the Indian IT sector, particularly in emerging areas like machine learning and data science, as a significant challenge that can cripple India’s $200 billion IT industry.

As for the business model, we created one “of, by and for” the tech industry. The success we have tasted so far is because of this. Addressing an industry challenge with the help of the people facing the challenge makes all the difference. Sounds obvious? While that may be true, nine out of ten startups fail to break these cardinal rules. The regular CB Insights report on why startups fail affirms this. Running out of cash, lack of market and flawed business model features are among the top reasons for failures.

Interestingly, the passion or the lack of it (and running out of it) is placed lowest among the 12 reasons the report has listed, something I don’t agree entirely. We will be underestimating the value of passion at our own peril. Some of the most successful startups that are universally admired came out of the serious passion of the founders to disrupt status-quo in their respective fields. Think Apple, Google, and Amazon.

Finally, picking the right investors on the road to success is vital. As I said earlier, cash is essential, but so is the source. In that sense, investors are not bankers but partners in the business. Therefore it is crucial to find those with whom we share values. The last thing an entrepreneur needs is an investor who cannot wait to make a small windfall at the expense of the business’s long-term health. Founders and investors falling out due to differences in how the business should be run is much more common than most people would imagine.

Success as an outcome is not guaranteed. Businesses can fail for several reasons, including external shocks that no one can predict, like the Covid pandemic. But there is undoubtedly a lot we can do to improve the chances of success.

(Saurabh Saxena, COO, Scaler and InterviewBit. Views are author’s own.)