Down but not out

“We ran the start-up for a year and got three to four clients, but that was the end of the venture,” recalls G. Kalyaan Kumar, one of the founders. “We realised that the intelligent tracking system was ahead of the times and the market was not ready for it.”

Entrepreneurship must be fad for some, strong desire to be one’s own boss for some others or a decision to continue a family tradition. But running an independent venture is not as easy proposition. For many of those who leave their safe jobs and defy family to take risks and risks, it is different ballgame altogether.

Matching the growing number of start-ups is an equally alarming number of companies that are shutting down.

A research by the U.S. Bureau of Labor Statistics shows that nearly six in 10 businesses shut down within the first four years of operation. There are many reasons why a business fails – poor business plan, unfavourable market conditions, too much leverage, picking a niche that is small, breakup of the founding team, having a single founder and poor location. Whatever the hiccups, some flow with the tide to see a slow growth while some explore a different market to pursue their entrepreneurial goals.

Dotcom ditch

Naresh Kumar (name changed) recalls his journey from launching a start-up in the U.S. to closing it down after the dotcom bubble burst to now opening his second venture, which is two years old in Chennai. The founding team comprising an Indian-American, a German and two Indians (both from IT field) were left mid-sea after the dotcom crashed without any proper communication. The “horizontal portal” with a pan-India presence was funded by a leading VC, but post-crisis the funding company gave a cold shoulder.

“Our repeated attempts to engage the VC team was fruitless as the entire management was changed out of a typical witch-hunting process and the new ones didn’t care. We had a successful consulting and development business that had helped us sustain till the funding and we were, as part of the term sheet, asked to completely shut down all our business efforts and solely focus on the project,” says Kumar.

To add to the crisis was the 9/11 incident, as most of their business came from the U.S. “We were not alone in our suffering. Around 400 dotcoms crashed, thanks to the short-sighted policies of VCs. Our overseas founders were dumb-founded at the cavalier treatment meted to very proven IT professionals with solid background and international recognition.” Any failure is painful and if it results in the shutting of the business it can even be a very demeaning experience.

Keep learning

Kalyaan, for example, launched his second venture in the real estate sector in Chennai, with the financial backing of his father, in three months after his venture with friends had to be shut down.

“It is a real thrill to be independent. For me it was like running 1,000 kms at a stretch,” says Kalyaan.

His second venture, Handsel, is five years old and last year Kalyaan started his third venture, Quads IT Solutions, with two business partners. “The difference between the first and third is that the former was with my close friends, while the latter I met through common friends. Everything is entrepreneurship has been a stepping stone. You need to keep on learning and changing,” says Kalyaan, who plans to invest in more companies.

Exploring new markets

The economic slowdown is another major challenge faced by a large number of first-generation entrepreneurs. Hyderabad-based start-up OrderMonger, which closed its operation in October 2008, writes in its blog, “This decision has been taken predominantly due to non-viability of the business while maintaining the high service standards we intend to provide… We sincerely appreciate the support and feel good that we were able to make a difference, so we are just sorry that we are forced to close down.”

Similarly, the founders of BookEasy, a Pune-based online movie ticketing service that shut its operations, are now focusing on Lipikaar, a language transliteration. Similar go the stories of start-ups like Ninemotion and TripMela.

Naresh sums up lessons one must learn from their ventures: Never be naive and trust a VC or anyone, as when the sky falls you stand alone; have a plan B; create alternate revenue streams or be very clear and get adequate funding and make sure it is in the bank and not on paper agreements; have at least six months cash reserve; think big and start with a small, manageable, demonstrable step; never lose faith and keep envisioning your customer.

(First Innings is a weekly column that celebrates the spirit of entrepreneurship)