We are often asked how many product startups do we have in India. And while some research points to 300+ (serious startups per year), the real answer is ‘Wrong Question’.
And here is why it’s a wrong question:
Let’s take a step back and ask how do we define product startups : A startup that is building products?
Of course, but let’s look at more than the syntactical definition.
Let’s take a further step back and ask what exactly is a startup? Leaving the technicalities of whether you have found your product/market fit or not, pundits often look at data around company incorporation and the number that applies to accelerators etc.
Wrong data point, my friend!
And here is why! A very significant portion of startups choose to not incorporate, till:
1. They get a customer/partner onboard.
2. They are raising funding.
That is, mostly forced (for good)!
Or a better way to put this is, when the feature turns into a product, which seems to show some signs of ‘Hey! There is a business to be made here!’
For most of the startups, these two goals take a while owing to the early adopter/funding cycle in India. So would you treat them as a startup? After all, they aren’t even incorporated!
Plus, given that shutting down a company in India is extremely tough, a lot of first-time entrepreneurs tend to delay incorporation till they are sure of the path.
Data Point #1 : What we see
NextBigWhat gets a minimum of 150+ entries in its ‘Submit a Startup’ form every month. In the month of January, we profiled more than 70+ startups. Out of the 70 we profiled, close to 60% don’t have a legal entity yet.
So what are they? They are ventures/hacks/research projects and aren’t a startup yet. Calling them product startups isn’t right as the founder(s) are still unsure of whether this is a viable business or not.
Data Point #2: Googling Google & Facebook.
It took Google co-founders one year to figure out whether the Google idea was a serious business or not.
From the wikipedia page:
“The domain name for Google was registered on September 15, 1997, and the company was incorporated on September 4, 1998″.
What about Facebook?
Mark Zuckerberg “began writing code for a new Web site in January 2004 – was incorporated in mid-2004.
Of course, the story is no different for other product plays.
Hold on! What are we trying to say!
Simple. Unless you are looking for data to fill up academic project (or consulting gig), let me tell you that company incorporation data holds no meaning when it comes to defining ‘product startups’ as 90% of these startups are experiments by nature.
Importantly, there is nothing called ‘Product Startups’ : 90% are Experiments.
The right question to ask is how many product experiments do we have in India? Once you ask that question, the entire perspective changes.
Because there are more than 300+ experiments that gets started in the country every month. A LOT OF them fail. Actually, most of them fail and do not even see the light of the day.
If you are talking about Product Startups, then talk about the Experiments that eventually lead to the creation of these startups.
Alright! So how many Product Startups do we truly have in India right now?
Unless you want to believe in fake numbers (report$) which others have been throwing across, we would like you to ask a basic question : How do you define startups?
If we were to do some back of the envelope calculations, and assume a fair percentage of those experiments that start never really live to see the next quarter, we’d still have a few tens of thousands, at least.
But the first part of the problem is to understand what a startup is, and define that right. We will, and also urge that the ecosystem talk more about ‘experiments’ and not just startups. The right question helps solve the right problem statement. And the wrong question will lead to all wrong data sets – the typical blind men and elephant story, if you recall?
TL;DR ? Right Questions Lead to Great Discovery. Wrong Questions Follow G.I.G.O Model.
What are your thoughts?
[Image credit: Wikipedia]