In the run up to the ET Startup Awards 2016 jury meeting on August 6, your favourite paper will be running columns by jury members on what they expect in a winner. Here is the fifth in the series, by Rajan Anandan
When you talk about picking a winner in the startup ecosystem, the most important factor is the founding team. In India, from an angel investing standpoint, I invest in only technology startups. The first thing I assess is the team. Two is better than one –I very rarely invest in single-founder startups. The team should ideally be technical and also have domain expertise in the area they are focusing. I also look for a team that has been at it for at least some period of time, which shows that they can work together and overcome challenges.
It takes 10 to 15 years to build a great company. I try to assess whether this team can stick it out through many near-death moments and persevere. Building a startup is an endurance sport, not a sprint. If the team has already been together for some time and already been through difficult periods that is a good thing since it shows resilience.
I also look at the space carefully. Is the startup solving a real problem, a problem that impacts a large number of consumers or businesses? There are lot of startups that are trying to solve the “nice to have” problems, as opposed to massive pain points.
India is the land of a billion problems and this creates unparalleled opportunities for startups. We have massive problems and unmet needs in every sector and in every part of the country – from education and healthcare to commerce, transportation and energy. I strongly believe the most interesting companies in India will be built to solve our largest local problems.
In technology businesses, it is hard to create entry barriers, but if you don’t create moats you will quickly end up with dozens of competitors. Being very thoughtful about how you will create real differentiation is very important. Many founders don’t spend enough time on this aspect.
What we have missed somewhat in the ecosystem over the past two years is asking if these are the kind of businesses that can, over time, become very profitable. It takes time -even the best technology companies don’t make profits in the first year or two, but by year six or seven or even ten, you have to start generating profits and ideally lots of profit.
Thinking about profit pools is something we have not been disciplined about. One of the red flags I watch out for when approached for angel funding is if the founding team looks to raise funds even before they have shipped the product. It tells me that you don’t really have what it takes to build a company.
Things have calmed down over the past six months. That is a good thing. Over the past two years, too many founders were looking at what was happening in the US or China and building replicas in India.
At the end of the day the winning product or solution is never what you start off with. Look at any great tech company -they have pivoted many times. What is important is to start with something that you think is real, then build fast, launch and iterate. The reality is whatever you thought is going to work, is not going to work. So the faster you launch, the quicker you will learn about what really works and what does not. (The author is Google’s Vice president for Southeast Asia and India)
Source : The Economic Times (Delhi)