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Business/Economy National Chronicle Special Startup

Lack of market understanding is biggest reason for start-ups’ failure: Ashish Bhatia

Ashish Bhatia India Accelerator

In the times of global pandemic, when economies are struggling to survive having no respite in the sight in near future, ‘India Accelerator’ – a leading tech firm – is determined to boost the start-ups in the country. Ashish Bhatia, the Founder and MD of the company in an exclusive conversation with National Chronicle described his vision behind the concept of helping budding businesses.

Here are the excerpts:

What is India Accelerator?

India Accelerator (IA), a leading seed-stage technology Accelerator in India, based out of Gurugram, is the only program in India backed by Global Accelerator Network. Its unrelenting focus during the 4-month cohort is to provide its startups massive growth through its mentorship, IA-Masters (CXO network), technological & peripheral services (Legal, Acctg, GTM, Perks etc) and finally, a platform to raise funding from investors. The Gurgaon based company runs mentorship-driven acceleration programs for Technology start-ups in specific verticals – Cyber Security (Cipher), HealthTech (Pulse), Agritech (AgriKul), Social impact, Sports, Media& Entertainment (Velocity) etc.

IA’s differentiation is its intensive Hands-on approach, 360 degrees’ coverage, investor relationships, partner n/w and its global focus. Our mentors are all senior successful people who have a passion to build the entrepreneurship community.

What motivated you to help startups?

The realization dawned fairly early on us – that there are only two ways to make money in startups: One is to create something valuable and the other is to invest in & back those people who are creating something valuable.  We realized very early on that we belong to the latter category, so India Accelerator was started with an idea to achieve both a financial return and a positive economic & social impact. The guiding principle is to actively pursue positive change in the startup ecosystem while creating wealth for everyone.

 

There are a number of reasons why Indian startups fail, the most important of which is a lack of funding. But lack of funding is a symptom of something more important. If an investor sees value in a startup he or she is more likely to invest, however, investors often fail to see value in Indian startups and hence don’t fund them 

 

What are the greatest risks before startups?

The startup ecosystem in India is exploding, however, with an extremely high mortality rate. We have our share of success with a number of startups achieving the hallowed Unicorn status but it is also a fact that 90 per cent of startups fail within the first 5 years. We understand that the country is still in the early stages compared to the west and hence lacks the maturity and the macro-level understanding of such an ecosystem. It is not ‘all is gloom and doom’; it is a natural evolution which is in the right direction and will improve as we go along.

There are a number of reasons why Indian startups fail, the most important of which is a lack of funding. But lack of funding is a symptom of something more important. If an investor sees value in a startup he or she is more likely to invest, however, investors often fail to see value in Indian startups and hence don’t fund them

Lack of market understanding is the biggest reason. Founders keep on building something which isn’t even required by the market. Identifying the correct market and problem is not easy.

Business model failure is another big reason. One should need external funding to scale not to survive; people have lately realized that unit economics does matter! An inefficient business model is characterised by the high cost to acquire a customers, low or unknown lifetime value of customers and having no scalable ways to acquire customers.

Finally, it is also a lack of competency and execution ability that is a cause of concern. At the end of the day, ideas are dime a dozen. It is the execution ability of the founder that is critical.

In the Covid-19 era, when the economy is severely affected, what are your suggestions for budding businesses? How can they beat the lockdown-blues?

The Covid-19 pandemic has posed unprecedented challenges for the startup ecosystem of India. Things are no doubt tough during these tough times. But every crisis is an opportunity. This pandemic has given an opportunity to the Indian tech startup ecosystem to have a harder look at the unit-economics of their businesses and become more capital efficient in the shorter and longer-term.

If budding entrepreneurs can come up with a novel solution to certain basic problems that people are facing right now, they might be able to launch a lasting business by creating demand for their products/services during the pandemic. To be successful a startup must be innovative. Unfortunately, Indian startups are less innovative than startups elsewhere. Many Indian startups don’t have an original business idea that is disruptive and by which consumers will be provided with better service. Entrepreneurs need to keep in mind that pandemic or no pandemic, innovation in products/services is the only way to continue being relevant to their audience.

Your observation about the economy?

There is a major change sweeping through the world of business. Advances in technology are accelerating at an extraordinary rate, and the effect will be to turn upside down virtually everything that we think we know about business and finance. The result is that the biggest, most valuable companies of tomorrow are just being formed today.

Right now the biggest hurdle that businesses and governments around the world are facing is how to boost their economies and help businesses stay afloat. And while it may be suggested that large multinationals can still survive the pandemic, it is the Startups &MSMEs that require the maximum assistance from governments. Instead of temporarily halting their businesses, as many have done in other markets, scores of startups in India have explored ways to make the most out of the current unfortunate spell. We must remember that it will be the Startups that will rewrite India’s economic roadmap & will lead India’s march to $5 trillion GDP.

What is the minimum criteria for a startup to get your assistance? Do you help startups in any field or is there any particular segment in which you are serving?

As much as we would want to work with a larger number of Startups & help them in any way we can, it is becoming increasingly difficult for Startups to get a position in the cohort. Our acceptance rate hovers between4-5%& it is getting increasingly difficult to get in.

We like to back founders where the companies are at the time where they just start to take wing. We select early-stage companies that use technology to transform & disrupt industries. Our selection philosophy is simple – we favour startups which focus on frugality and capital efficiency. Burn models are a no-go. We take a lot of proud in our being Founder-friendly ethos and alignment with Founders is critical for us. Founders who come into the accelerator with unrealistic expectations, such as guaranteed funding, will come out of the program unsatisfied& we don’t want such founders. There are a number of Invest Bankers available who can do a much better job of this than us. We almost work as a co-founder with our founders for at least five years and beyond.

The success of the startups depends a lot on how well the Founders are able to mould our program into running a successful business

We have launched 5 distinct verticals and are also launched our remote avatar given the times we are in. ‘IA anywhere’, a remote program, plans to run its first full cohort in 2020. If you can’t come to us, we will come to you is the principle. Entrepreneurs who cannot come to GGN due to family, health, or immigration complications opt in to the ‘Anywhere’ program. Anywhere program companies do have in-person experiences at the beginning, middle and end of the program.

In about three years of your company, how many startups have you helped to grow and how they are doing in terms of business and growth?

The success of the startups depends a lot on how well the Founders are able to mould our program into running a successful business. That being said, our ecosystem is such that it helps every company in our cohort with all the relevant assistance (including mentorship) they may require to grow their business. Our portfolio is close to 50 companies now and while we are still some time away from Series A for any company (typically it takes 4-6 yrs for a company to hit that milestone and we come in very early in the lifecycle), the indicators are still very healthy given the nature of the beast. 80% of our portfolio is alive and almost 2/3rd of our portfolio has raised the follow-on round and thriving.

Any expansion plan in the next five years?

Going forward IA will have more diversification of its offerings, more global reach, across more countries and also would participate more at later stages. Also to the original vision of setting up IA, contrary to the belief of cutting losses to focus on winners, we would want to use our resources to continue helping entrepreneurs who are struggling as well.

We would want our India accelerator-backed company to go public in the next few years. That is the internal benchmark we have set for us. Much of the Start-up & VC Industry is about being showy. Many of the loudest, most hand-wavy folks with the bright shiny object are good at attracting LPs and entrepreneurs. We are the shut up and perform type.

We have been pretty inspired by YC. What started as an accelerator program alone has now expanded to a committed venture fund and multiple events. They now source 5% of Series A in the US. We want to grab that space here in India and are working towards a similar model of growth & expansion. We are already working on launching IA fund in next Quarter. We want to be the birthplace for some of the world’s best startup companies from India.

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