Why start-ups fail and how to learn and grow from failures

The Brand Called You (Episode 4)

Key Highlights

1. General trends noticed in the startup world

2. Discussing the sustenance of me-too companies

3. How to identify a ‘flawed’ business idea?

4. Is it important to know when to step away, as an entrepreneur?

5. When does one approach private equity?

6. The importance of management teams in a growing business

7. The one thing that makes or breaks your entire vision

 

 

Transcription

Q: General trends noticed in the startup world

A: The general trends noticed is the pattern of entrepreneurs launching a business but not seeing through the implementation of one’s business idea. Some entrepreneurs that experience failures also see it as the end of the world and give up the dream altogether. I would advise taking every defeat as a lesson to be better equipped for future ventures.

 

Q: Discussing the sustenance of me-too companies

A: A me-too product is a product/company who pioneers a product or service based off of an existing winning product/service. Majority of whoever copies your idea does not put anything originial and therefore loses on the ability to sustain themselves long enough. However, there are always exceptions; Samsung phones came much later in the game but are giving Apple a run for their money. Samsung is one such example that dominates our market. So, the important thing is to implement the idea and keep on innovating.

 

Q: How to identify a ‘flawed’ business idea?

A: Several ideas set up an idea for failure; whether that is recreating a business on an idea that already dominates the market or overestimating the potential of your product/service and setting yourself up for failure. So don’t keep on flogging a horse that is not going to move.

 

Q: Is it important to know when to step away, as an entrepreneur?

A: It is important to know when to step away. You must remember, a team that starts the business may not necessarily help it reach the next stage. It is important to know when the management and teams require a change to keep the ball rolling.

Q: When does one approach private equity?

A: There is always a risk associated with bringing in an outside investor. The risk with bringing an outside investor is that while he/she may support you, he is accountable to his shareholders which might result in you losing control of your company before you know it.

First, try and put whatever money you have; raise money from friends and family; then go to angel investors who put in small amounts of money into your business. Roll out your business, and let it operate for a while; approach private equity much later in your business.

 

Q: The importance of management teams in a growing business

A: Management teams are as important as getting the right team at the right time is. There may be entrepreneurs who don’t delegate at all and I have also seen entrepreneurs who load up on senior management so much so that all the money raised is gone in paying salaries. It is important to strike a balance between bringing in a few people of high calibre and people who you will be able to pay without draining the profits of your company.

 

Q: The one thing that makes or breaks your entire vision

A: The single most important challenge is a company running out of money and the entrepreneur having to scramble for money because of the lack of a plan. With panic setting in, the lack of a plan teamed with lack of money becomes a massiv roadblock hard to overcome. As discussed earlier also, the best time to raise money is when you have enough money in the ban rather than raising money when you’re out of it.

 


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