The rule of 3



In India today, the high number of industry events, reams of newsprint and airtime on TV devoted to entrepreneurship seem to indicate that entrepreneurs have achieved ‘rockstar’ status. Plenty of positive changes have happened in recent years that have led to the rise of the eco system. The Indian entrepreneur today is younger, fearless, bold, not afraid to experiment and fail, and able to disrupt the status quo using technology. The sheer ambition of this generation can give birth to large businesses—not just for India but for the global market.

Hype vs reality

Currently, there areaccelerators, incubators, angel networks and early-stage funds that are helping entrepreneurs take the leap of faith. But it is important to distinguish the hype from the reality; less than 5 per cent of all startups succeed. I believe passion and stupidity are integral to success as an entrepreneur. You need passion for an idea that you think will change the world, and can make a success of. You also need the stupidity to actually believe that you can pull it off. Ninety-five per cent of startups fail and no sane man will bet on something that has less than a 5 per cent chance of success. So you really must be foolish to believe that you can succeed against such small odds.

The startup environment is a minefield and there are several ways a fledgling venture can succumb to infant mortality. I have listed three of the most common issues entrepreneurs struggle with:

  • STARTER'S BLOC Illustration: Job P.K.

    A mediocre or average business: While not all businesses need to be able to scale, raise massive capital or monetise through exits, trade sale or IPO, there is no glory in running an also-ran business just for the sake of being called an entrepreneur. The biggest mistake will be not doing justice to the potential and getting stuck with a mediocre business and a ‘Hindu rate of growth'. It is better to fail fast and move on.

  • Being excessively optimistic: Sometimes entrepreneurs let the passion for an idea blind them from the reality of what it takes to build a business. The ‘rule of 3’, as I call it, is an important element of any business. I believe any business takes three times the time, three times the effort and three times the capital envisioned or projected in the business plan. Accordingly, you need that much more runway in the form of capital; most businesses shut down because the capital runs out. So, raise enough capital and then some more. Don’t obsess about dilution and giving up of equity. No business ever shut down because of dilution, but they often do because they run out of money and the game is over. With adequate capital, you can survive to fight another day, make mistakes, fall, learn from these and get up. It is like having enough fuel in your car so that even if you get lost you can get back on track. If you run out of fuel, you are stranded.

  • Not having a core team: Entrepreneurship is a tough, hard and lonely game. No one has all the ingredients, either physical or emotional, to pull it off. There are so many skills needed and it is always better to have more than one founder. It is equally important to have founders with complementary skill sets as part of the core team. The most common mistake is to have a founding team with similar skills. Apart from not adding varied skills that are integral to succeed, there is also the risk that the cofounders may step on each other’s toes if they all have the same area of expertise.

India presents great opportunities to build successful ventures. While there are plenty of options, entrepreneurship is tough, and one needs to be prepared for what it involves and go in with eyes wide open.
A serial entrepreneur, Ganesh is chairman, Portea Medical, and partner,

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