When should you startup - maximizing your chances of success

One of newer fads of our times seems to be starting a company! I say "fad" because its happening so much and so fast all around me that it doesn't seem real. While it is great that the Indian mindset towards entrpreneurship has gone through a radical change of late, it also seems like a bubble. A few years back, most techies were extremely risk averse and content working at one of the big three IT companies but today I see many youngsters (some fresh out of college) leaving lucrative jobs to start up. Though I have always advocated my belief in entrepreneurship, I still feel certain amount of prudence is a must before taking the plunge. If too many people take this plunge without giving it sufficient thought, many of them will fail. This can have the effect of simply putting off others from starting up - which could burst our current startup bubble! So here is some food for thought for those trying to figure out if they are ready to start up.

1. How is your financial situation? This is first question you should ask yourself. Do you have enough money in the bank to sustain a decent life style for at least another year? Do you have any dependents? Is there a big EMI for a house or a car due every month? Can you really afford to deplete your bank account so much? You will need all your energy and concentration to have any chance of success in your startup. Worrying about how the bills will get paid is not going to help at all. This is one risk simply not worth taking. Save up before starting up!

2. Do you have a support system around yourself? Do people around you support your idea of starting up? How do your parents view your decision? Is your spouse ready to put up with what starting a new venture takes? Startups invariably go through ups and downs. During the "downs", you will need complete support of your family and friends. If you are starting up in the face of opposition then there is a likelihood that every small failure will be met by a "I told you so" at home. That is not a good situation to be in. So get a buy in from those who matter.

3. Does your idea depend on external funding to survive? As a first time entrepreneur, it is not a good idea to depend on external funding to stay afloat. Your business plan might require external funds to grow, but it shouldn't depend on external funds to stay afloat. Web startups should particularly take note of this. It always makes senese to build a business which starts bringing in revenue early on. Even if the revenue is small and not sufficient to meet the expenses, the fact that somebody is willing to pay money for your product or service is a good validation of your plan. Depending solely on future ad revenues or a buy out by a bigger company is not such a great idea because those things happen to maybe 1 out of 1000 web based startups out there. VCs don't fund too many inexperienced first time entrepreneurs. So if the entire existence of your startup depends on convincing a VC, it might make sense to give it a second thought.

4. Do you have the right credentials? A new company is nothing more than its founders. Since there will not be a proven track record for your product or service, potential customers will judge it solely based on their perception of the founders. So if a mobile VAS startup is being run by people with no experience in mobile industry, selling will be that much harder for them. If an IT services company is founded by engineers fresh out of college, they will find it difficult to convince potential clients of their ability to deliver. So, while it is not essential that you startup in the space that you know well, it does hurt your chances of success if your credentials, background and experience can't vouch for you.

5. Does somebody on your team know how to sell? Selling is an art and most of us techies have no clue about it. A team with complementary skills has a much higher chance of success. In particular, having somebody in your team who knows how to sell helps immensely. Building a product is one thing, being able to sell it another. Whether you like it or not, fact is that most companies became big and successful because they could sell better and not necessarily because they had the best product in the market.

6. And finally, do you understand what you are getting into? Have a frank talk with more experienced entrepreneurs about what they went through when they started up. Starting a new venture is very hard, especially for those doing it for the first time. It takes immense amount of hard work and sacrifice. It means having virtually no time outside of work. It means seening less of your friends and family. It means taking up the constant stress of managing cash flows. It means fretting about losing clients or people. When you look at it up close, it really isn't that glamorous!

My intention of writing this article is obviously not to discourage future entrepreneurs! However, even the best of startups have very little chances of success. So it makes sense to maximize the factors that are in your control. Just a little bit of extra thought, planning and introspection before starting up can make the differnce between success and failure!