STARTUP COMMUNITY SHOULD FOCUS ON SUBSTANCE OVER FORM

Just 15 months ago, in the middle of world’s worst pandemic in 100 years, Indian startups were considered messiahs who will collectively save the world from all the problems, by offering their technology driven solutions. The media hailed them as larger than life heroes; global predictions were made as to how many unicorns India will produce in the next 2 years and how many billions of dollars will flow into these startups!

Ironically, fast forwarding the story today, the news that we are reading everywhere is of layoffs, funding drying up and the crash landing expected by many of these startups. Even the listed startups have eroded value across capital markets globally, including the much hyped listed entities in India.

Where does the Achilles heel of Indian startups lie? According to me, the answer lies in working on “Form over Substance”. Very quickly, their efforts are directed towards magnifying their existing position larger than what it is. Armed with weapons of social media, PR and digital marketing, many get carried away.

Lets understand the areas in which a startup can remain level headed and focus on Substance over Form.

Image Management

Excessive engagement in “image management” than “business management”.

Indian startups, too early in their lives, get obsessed on their external image. They are more concerned on how the media, the investors, their social circles, their professional circles perceive them. It is important that their business speaks for itself. Let the customer feedbacks, real financial numbers, stakeholders speak for the business and promote it. A constant hammering on social media that “we are awesome; we are great!” may not speak for the reality. It may even be a result of founder’s dichotomy within his/her consciousness, that the business is not delivering much value — both internally and externally, but there is a pressure not to accept it or to project it otherwise.

Image building, Marketing, PR etc are important and critical today in every business. However, it becomes relevant when these activities work towards specific business goals. They need to have a tangible impact on the business and on communicating a genuine value proposition at at large. They become form over substance when they are used only for the image management of the founder or the company.

Funding — Funding is important and critical; but its form over substance when you run the business only to raise funds, not raise funds to run the business!

The race today, is not who builds a better and a larger business, the race today is who hits the headlines on fund raising first, and how often! There is an adrenaline rush to get entangled in the labyrinth of fund raising — in older times it was called Chakravyuh — many can get in, but very few can get out of it successfully! Startups start to believe that all the fundamentals that are used to evaluate a business are no longer relevant. They have a myopic focus on the next fund raise and the corresponding valuation. This needs to change even from investor’s perspective since many a times they are the ones that exert this pressure. Funding and strong fundamentals should go hand in hand at all times. A lot of people have written about vanity matrices. Founders and startups can avoid that trap at the onset and can set higher standards.

Business & finance fundamentals — Business and financial fundamentals vis-à-vis your press releases on your performance are as similar as your real photo vis-à-vis your curated photo uploaded on Instagram for more likes!

Suddenly there is a lot of talk about business fundamentals, profitability etc. These realisations keep dawning on the investment community in periodically. It’s a cycle — aggressive investment, the boom, then the bust and then the so called realization of focusing on fundamentals. Why should the startup start focussing on the fundamentals only after a nudge from their investors? Every founder, ought to do that since day zero. A close eye on cashflows, a clear roadmap to profitability, frugal setup, high standards of corporate governance, are all the basics which any startup needs to inherent in their DNA. The timelines for profitability needs to be reasonable. The roadmap should be not so long that we remember the great economists John Keynes “In the long run we all are dead”!

Are you really solving a problem?

Finding a problem after starting to deliver your solution is a classic case of form over substance

Any startup workshop you attend globally, the first thing that they will tell you is do a startup only if you have identified a problem and have found a solution to solve it. In reality, when you observe the startups, many a times, it’s the opposite. They have developed a product or a solution and then run around to find a problem to solve it. To do this, they need to use every trick in the book to be applied — deep discounts, good looking packaging, aggressive and expensive marketing and many more. This is a classic case whereby the core of the issue is not solved for. The fundamental as to why you exist is not many a times answered. On top of this, if you are lucky to get funded, then the goal post is completely changed.

Finally, have atmost humility

Humility will bring genuineness in your thoughts and actions, which in turn will bring help in difficult times.

For a founder to provide meaningful solution and product that really makes a difference to his/her customer and society at large, a large amount of humility is required at all times. Many founders are not able to handle the instant success they get, specially when their funding rounds are published in the media. The ego is inflated and the arrogance sets in too fast. To build a long lasting business with impeccable reputation and image, atmost humility across the teams is required in a startup. You may have built an out of the world product. But don’t forget that there is another startup in some corner of the world already getting ready to dethrone you. Thus don’t get blinded by too early successes; specially when your company is surviving only the equity rounds raised every fifteen months. Be nice to the customers, be polite with your stakeholders. All that will come and help you when your funding dries up.