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Why 81% of Indian start-ups die?

An Economic Times reports that Indian ecommerce ‘e-tailers’ have collected racked up $400 million in investor capital! And yet, most of these ventures are failing. I liked the snippet that showed up in my LinkedIn feed this morning.

Source: LinkedIn

Read up the comments for fascinating insights. One gentlemen even cited the 7 reasons why these ventures never take off. Let me list them down for you:

  1. Lack of a vision
  2. Lack of market understanding
  3. Poor competency
  4. Poor execution
  5. Excessive focus on weaknesses
  6. Every founder cannot be the CEO
  7. Lack of Innovation

I don’t quite agree with points 1, 5, and 7. These ventures do have a solid vision, without which they wouldn’t have received funding anyway. And I don’t think they’re obsessed about their weaknesses, in fact I believe that’s one area they should pay more attention to. Understanding fundamental weaknesses helps companies to make way for contingencies that will help them propel their growth trajectory further.

Innovation is a throwaway word and doesn’t have any meaning by itself. Each and every company can be innovative in its own way. Investors, start-up founders and critics basically cop-out by blaming it on the lack of innovation. Also, creativity and innovation takes time and space. It cannot happen at the drop of the hat or on-demand.

Which brings me to the main reason why I think these ventures are failing — lack of a competent workforce. You don’t need just people to run a start-up or even an established organization. You need competent people to run it. Folks who’re not only highly capable but are rockstars at what they do. That’s the caliber of people who can propel these companies to the next level.

Unfortunately, the Indian employment ecosystem focuses on low-cost, jugaad alternatives over highly capable individuals who can turn things around. Why? There’s no money! That’s something I can’t wrap my head around to… they’re basically saying they’ve got $400 million to run 20 high-growth (potentially, which obviously isn’t the case) start-ups but couldn’t budget out $50 million to recruit the most competent rockstars at the workplace? That’s a load of bull crap. I know it. And I know, you know it too!

I really believe both investors and founders need to pay attention to human captial and not just capital. It’s the people who will drive organizational growth. And of course, you’ve got to have a great product too… but then, who’s going to tell that to you if the investors missed it? Your people.

Invest in them. It’ll be worth it. Always.