Nobody said running a startup was easy. A startup’s life is marked by the thrill of the heady highs and rough lows. Of late, the Indian startup industry hit a bottleneck, with funds drying up, as investors have become more cautious about where to park their funds.
It has been a roller coaster ride like the game of snakes and ladders, with the thrill of the climb in the past of couple of years and the sudden rude slide down since the last few months. The dice is clearly not rolling in the favour of startups, with investor interest and valuations reflecting a clear lack of confidence in their capabilities. More than one startup is feeling the bite of competitors at their heels gobbling them up by way of mergers and acquisitions. They have been dumped in the troughs of low valuations and need a lot of luck to roll the dice in their favour and get back on track.
The luck-based game of snakes and ladders has done more harm than good
Snakes and ladders is pretty much a game of luck, where one roll of the dice decides your fate. In a single move, you can either climb to the top, or come rolling all the way down with one wrong move.
This is how the startup game too has been playing out so far, with a lot depending on how lucky start-ups have been with getting funding. While the ones who have managed to raise funds were able to surge ahead, many of the same startups, when unable to raise the next round of funding, have seen the coin flip and come crashing down without warning.
For instance, the golden era of the Indian startup industry has been ruled by the likes of Flipkart that has raised around 3.2 billion so far and created history. Their high GMVs and famed sales regularly made headlines and have been the toast of the town in the past. In 2015, the company was valued at $15.2 billion and was on a winning streak.
However, its valuation has now been rolled down to $10 billion; the 4th devaluation in a row. Flipkart is not alone in hitting the lows. Zomato’s valuation in May 2016 was slashed down by half and Snapdeal has been struggling to raise more funds too. The likes of Jabong were snapped up at a fraction of their old valuations by Myntra from a projected $250 million to $70 million. Quite a few like Fashionara, PepperTap, AskMe, Zippon, Exclusively, TaxiForSure etc. even bowed out of the game and shut shop in 2016.
Flush funding early on has played a large role in the snakes and ladder scenario due to a dilution in the controlling stakes of the founders, and hence, the investors called the shots. Investors, in turn, were in a race to outdo each other, and therefore, pushed them into scaling up and gaining market share at a highly accelerated pace without checking on the costs, viability, product offering and capability.
Startups, on the other hand, indulged in a game of one-upmanship by selling products lower than their value to corner a fickle market and clock sales volumes. With mounting losses, the impending threat from new entrants such as Amazon etc. in the market and a change in global financial patterns, investors are taking a closer look this time and only putting their money where they are assured of the business model and its long-term sustainability.
A new approach required for survival of startups
The golden goose that laid the golden egg has now turned their backs on its beneficiaries. They have finally woken up to weak business models, poor execution strategies, mindless spending, key executives exiting, drop in market share and a lack of concrete future plans.
Until recently, the business model of many startups was totally dependent on injection of more and more funds from the investors. Now investors have a whole lot of questions to ask before they put in any more money. They will be now looking for profitability, the course to be chartered towards profitability, business model, unit economics, GMV, market share and innovation with a pulse to the needs of the market. To roll out this list of prerequisites, startups need to play a new game.
The switch from snakes-and-ladders to the chess board
Chess is played with some basic opening strategies which are more or less standard and people often memorize them and play automatically. A startup too should start with an eye on perfecting the basics, like developing a strong product and testing it, branding, marketing, logistics, technical support etc.
Just like the importance of the Queen in the game of chess, who should be held onto as far as possible, a startup too should identify and hold onto its key talent and nurture them rather than run after learning new skills.
Moreover, in the game of chess, one always attempts to out-think the opponents and predict their every move. Similarly, for a startup it is equally important to be one step ahead of the competition and make the right moves before they do.
Most importantly, the game of chess is a cerebral game and not dependent on the roll of a dice, like snakes and ladders. Here, every move it strategically planned and there are different moves you can plan to reach your end goal. So, even if one move backfires, you don’t really come crashing down, as is the case with snakes and ladders. You can always count on alternative strategies to achieve your goal. Running a startup should also be a well thought out game plan in all aspects and every move should be calculated to protect the health of the company. If things don’t seem to be working out one way, you should fall back on Plan B or Plan C to realize your vision.
It’s time startups checkmate their competition, protect their original ideas, put their house in order and move at their chosen pace and direction. Don’t wait for that single stroke of luck or wait for that investment to take you places, since if you don’t anticipate the challenges in your way and plan how to overcome each one of them, there’s not much you can do when the same luck decides to leave your side.
While the thrill of the game of snakes and ladders is all about the uncertainty of where you’ll be standing next, that’s not an ideal situation for a startup to be in. For a startup to be on top of the game, it is important that you weigh your every move and know precisely where you’ll be standing, irrespective of whether you fail or succeed with each move, and then start afresh from that point to realize your vision; pretty much what chess is all about. With carefully planned moves, you’ll realize it’ll not take you long to achieve the ‘Grandmaster’ status with your startup.