Internet startups: The path to success – Alap Bharadwaj

With the e-commerce and internet space gaining steam over the past few months, the Viedea team decided to put together a business development exercise that focused on the new entrants into this arena. After speaking to in excess of 30 companies, analyzing their business models and understanding their challenges, I noticed some important trends.

1. The “me too” bane: I’m not sure if there is a dearth of good ideas out there or that Indian entrepreneurs lack creativity, but an increasingly large trend that has taken over the internet space is the proliferation of clones of successful websites from the west.

For example the success of Groupon in America has led to a slew of discounted, daily deal, group buying services based websites in India jostling for market share in an arena where they can only be 2 to 4 players that will succeed in the long term.

In my opinion if you cannot significantly differentiate your offering or provide a compelling platform, the mere aping of a foreign trend will lead to nothing but a failed venture.

2. Hygiene Factors: It still surprises me, how many aspiring Internet business fail to get the nuts and bolts right. You log on to a website that promises you the sky and the earth, but are unable to navigate, search, order, browse in a clear manner. When site design turns out to be poor a visitor is even less inclined to return.

The attitude that “if craigslist did it with plain forgettable site design, so can we” has got to go. Craigslist is a one in a billion company, and that story will probably never repeat itself.

A clean, crisp and engaging design is a must and should not be put off for later. Other factors like 100% functioning payment gateways, customer service numbers, bill generation, clear transparent reporting of extra charges etc are also overlooked just because entrepreneurs believe the “concept” is strong. The concept will get a venture no-where without the hygiene.

3. Business Plans: In today’s world of venture capital investments and blockbuster IPO listings it still surprises me that most young internet companies fail to build out strong forward looking business plans.

As an investment banker the question I look forward to asking most entrepreneurs is where will you be in five years in terms of revenues, profits, manpower resources and funding?

The largely collective lack of enthusiasm to provide an answer to this question is only second to the slipshod, half baked, not thought through, generic response of “$100 MM company”, in terms of disappointing interactions one can have with a burgeoning company.

Vision and holding your company to that vision are key in terms of success not only in driving business but also attracting investors and raising funds, even if the vision is realistic and conservative.

4. Angel Investment: Another surprising trend is the misplaced confidence most entrepreneurs in this space have in the belief that their ventures will be able to raise venture capital funds.

The tech world is not what it used to be and VCs are done splurging on anything and everything remotely connected to the Internet. Unless you are a second or third time entrepreneur with at least one very successful exit behind you, the odds of raising venture money are slim at best. Why so many entrepreneurs miss out on raising money from high profile angel investors is beyond me.

Angels are much more inclined to part with money for first time entrepreneurs, plus they bring in much needed experience on both the operational and execution fronts. Finally the value a high profile Angel adds to your company becomes immediately visible once the venture approaches VCs for their Series A.

Most VCs feel a much larger degree of comfort with an industry veteran on board and this actually leads to an acceleration of the entire fund raising process.

There are many tiny things that differentiate a successful venture from another, but making the four on top are taken care off will go a long way in ensuring the growth and success of young internet companies.

Advertisements

About Deepak
Venture Capital and M&A advisor, Entrepreneur, Startup enthusiast..

4 Responses to Internet startups: The path to success – Alap Bharadwaj

  1. probir says:

    Alap, you seemed to have nailed it on the points you mention.

    Alas….

    probir

  2. Vijay says:

    Well written Alap.

  3. Thanks for the feedback guys. Have you guys encountered similar problems, can you tell us how you deal with such a situation with start ups.

    The EDITOR.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: