Boom times are dangerous. Meet Mr.Tech Entrepreneur.
Had a Rs 33.65 Lakh (CTC) job as a Tech Lead/Architect two years and a half ago at Big Name Tech. Had an idea and created a cool online service in a hot space.
Let the games begin.
Find an angel, sell the dream – check.
Create a buzz in tech media – check.
Appear on TV, in print, at major events – check.
Find a VC looking for a good story, and do a series A.
With a partial cash out!
Remember – there’s no profitability yet, and the rock star developers alone cost about 5x of the revenue. And investor pressure is mounting to show growth and do the next round of funding as soon as impossible.
So another round of cash is the name of the game! And that needs “growth”, now that “traction” is already proven. So there’s a sales org, and perhaps even some money blown on crazy discounts (marketing spend amortized over the next 10 years!), on TV (nationwide, nothing less!) and on signing up ‘customers’ no matter what.
“Growth” stories sell easily. Talking about 20x sales is good publicity. Even without proper accounting, and in some cases 100% realization. The next big round is celebrated as the ultimate success.
Then it was about going IPO so the investors, now insiders in this game, can play it too! And hey, the market’s just waiting to lap up a good tech story that’s now a known brand name – thanks to all that advertising, and the IPO got oversubscribed!
So this game was played well. And then the stutter showed up. The growth – manufactured – obviously slowed significantly. The business – if you could have ever called it one in the context of grade 3 profit-and-loss calculations – took an even bigger hit. Customer service suffered, folks got laid off, and nobody cared. Things have since moved into a slow burn mode.
While that’s a hypothetical story, there’s truth in many parts of it. Travel companies which do not care about travel, or travelers. E-commerce outfits which are so caught in scale that they forgot to ask fundamental questions about what type of retail they exactly were, and how the business for that works. And now that the money in in the bank, have little motivation left for the business they were purportedly passionate about.
So is your startup about making money off creating the startup, or actually serving a real need?