Most of the game-changing startup success stories have come from the shores of the U.S. Let me list down just a few from the recent past – Google, Facebook, Twitter and LinkedIn.
Founders of LinkedIn, Twitter and Facebook, came out with promising ideas at the dawn of the next revolutionary internet consumer behaviour. But they all came up with the differentiated service offerings for the overlapping customer bases, even at the dawn of social networking phenomenon. Google, though essentially a ‘me-too’ model, perfected the search algorithm. They were all unique businesses. On probing further some more interesting points stand out about their early stages:
– Each of the founders had the premium University names endorsing their capabilities.
- Google – started by Stanford graduates.
- Facebook – started by a Harvard dropout.
- Twitter – started by a New York University dropout.
- LinkedIn – started by a Stanford graduate.
– All of them were based on a service platform which was free to use. The revenue potential was based on loose grounds, which would depend heavily on the number of unique visitors per month. Revenue would come from the various advertising options or any other unique sales strategy which was yet to be defined.
– All of them were funded at the seed stage followed by VCs chasing them. In fact they were funded at the ‘revenue-less’ stages (forget the profits).
Looking from India’s angle, do we have any such game changing startup in recent history? Do we lack such entrepreneurial intelligence (EI) within our professionally educated class? Or do many startups die early due to the paucity of funds when most of the clones get funded?
As of now India has more than 30 players in the deal-discount space which are all clones of Groupon (again a novel concept that originated outside India), and many of them have received funding at various stages. The irony is that Groupon has still not started raking in huge profits and has not yet proven long-term business viability as was evident by the bash-down that it faced from the analysts when it filed for IPO and Groupon’s true financial status surfaced.
Considering the fact that all the above companies were started by students or alumni of the most premium colleges of the U.S., and hence were funded at the early stages, can we say that our IITs/NITs and the IIMs parallel them enough to help their alumni or students draw seed funds at early stages as they do in Silicon Valley?
Our premium colleges do hold proxy to the capabilities of our professional graduates, but as entrepreneurs these graduates still do not pull seed funds for their startups.
Maybe somewhere we are losing out on Facebooks or Twitters being formed in India due to lack of funds in their early stages. It is easier to invest in the startup clones based on concepts originated elsewhere as there are metrics for that concept against which the investors’ can gauge the risks. But our investor community does not pitch in even at a revenue-plus stage when the idea is unique; leave alone the revenue-less stage.
Where is the flaw – is our investor community risk averse that they invest only after top line figures are high? Or do our alumni even from premium colleges need to show more competence to build trust the way it is in the Silicon Valley?
What is your take?
[Guest article by Mridula Velagapudi, who has also written a book on women entrepreneurship.]
