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‘5 common mistakes entrepreneurs make’

Management consultant and CAN angel investor Bharat Banka knows a thing or two about setting up a business. Here’s his advice for startups. By Shweta Gandhi

With over 24 years experience, Bharat Banka is a well-known veteran in the industry and financial services. He is currently advisor to many marquee companies and fund houses on M&A, business and strategy, finance, asset management and startup/incubation; they include TVS Capital Funds, Sterlite Technologies Ltd, etc. In 2009, Bharat raised $200 million and founded Aditya Birla Private Equity; he was leading it till 2014 and before that he donned multiple CXO hats.

An angel investor for over six years, some of Bharat’s early-stage bets include OYO Rooms, Perpetuiiti Tech, Invenzone, TalView, AdStringo, InstaSafe and Infinity Assurance. “To judge how good a startup is, I go by the traditional matrix of seeing how serious and committed the entrepreneur is, his assessment of the market potential, which shows what kind of background work he has done, asking deep questions about the size of the market, broad mapping and seeing how reliable and capable the team is,” he explains. “Right now it’s a conducive environment for startups with the government schemes and initiatives helping the sentient in the startup ecosystem, as compared to earlier. However, while volumes in supply of entrepreneurs has grown exponentially, the same can’t be said about quality.”

Here, he lists down the common mistakes he’s noticed tech entrepreneur make.

#1 Not preparing enough
“Preparation is a must as it shows how well the entrepreneur understands his market. A startup always looks at a problem statement from the viewpoint of the entrepreneur—you believe there exists a serious problem that you aim to address, but that may always not be the case in reality. It takes a lot of time to establish yourself in the market, and your pitch has to reflect that. You need to do a lot more work on the drawing board to build a path to a sustainable business.”

#2 Jumping on the investment wagon too soon
“Yes, sometimes more money is required. But raising too much money too soon can unbalance the future of a startup. You should break out of the bootstrap model only when you feel comfortable enough about ripening up of the idea. Specifically, B2B startups can last in a bootstrap mode much longer than B2C, going up to three years, if they are a unique and strong enough offering. A B2C usually lasts for six to eight months, maximum a year.”

#3 Not working like the A-Team
“An entrepreneur has to surround himself with a good team. It has to be a rounded and balanced team with each of the functions being taken care of—marketing, technology, operations and finance. Whether it is one founder, two or three, or the functions are manned by key executives, they have to be relatively capable and complementary in skills and so long as they are being given due ownership. Before investing I always run a background check on the founder to see if he has the right attitude and the correct value systems.”

#4 Not being realistic
“A lot of startups follow an approach like the toss of a coin. Some may sell products/services too cheap too soon, while some may have really high expectations and may not be able to implement ideas too well. A smart entrepreneur should not dilute too much initially, as that would constrain him from having enough to dilute for future fundraises and to on-board key employees/ co-founders. He has to be judgemental about equity for valuations, and has to save for himself so that he has enough stake in play later on for the entire setup to be motivated and to take the startup to the higher levels.”

#5 Copying the West
“In India, you have very exciting startups, but a lot of entrepreneurs are mindlessly copying ideas from the West. And with recent easy seed/ angel funding, they are able to take the startup forward with average quality. This has played out a lot in last one to two years. Initially, about five to six years ago, funding used to be selective and only with something unique about every startup being funded. You can’t blindly say that something that has evolved in the West is going to work here in India. A customer needs to evolve and adapt, and the market may not be ready for it yet—if that happens, you will end up burning cash and be left high and dry simply because you might be too ahead of the times. And later, another startup will come at a more matured stage and take over what you couldn’t achieve because the market wasn’t ready when you launched.” 

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