VCs may prefer second time entrepreneurs.
Economic Times reports that failure isn't such a bad word any more. A generation ago, many looked askance at entrepreneurs, and to have a venture fail was proof of all that was wrong with 'doing business' -the fact that it wasn't a "stable" or "dependable" line of work. Today, the rate of failure in a world where 'starting up' is a catchphrase isn't that much lower. A recent study by startup tracker Xeler8 shows that 43.7 per cent of startups have gone bust since June 2014, most of them in hyped sectors such as logistics, e-commerce, food tech and analytics. What's changed, though, is the fact that it isn't seen as such a bad thing. "If 40 per cent is the failure rate, I believe we are in good shape," says Shripati Acharya, co-founder of Prime Venture Partners."
As venture capitalists, 70-80 per cent failure rate is expected because entrepreneurs are overcoming fairly significant odds. I'd say our ecosystem is doing better than other parts of the world," says Acharya. The average age of these failed ventures was 11.5 months, although the 32 venture capital funded startups lasted a little longer. So once an entrepreneur fails, does he or she get a second chance? More than just a second chance, it seems. The Xeler8 data shows that most failed entrepreneurs took corporate jobs or joined other startups, while 24 per cent started another venture.
"As venture capitalists, we love second time entrepreneurs because failure teaches more than success," says Acharya. "I am not surprised that most founders prefer to go to corporate jobs after a let-down. It could be because they are looking to build a financial base before taking the plunge again," he says. "Most failed entrepreneurs remain active in the startup ecosystem and it is likely that they will return." That's exactly what Thirukumaran Nagarajan, co-founder of Bengaluru based startup Ninjacart, which connects farmers and brands to retailers, did. "When I first built EduRaft in 2011, it was a great idea -I had 80,000 parents visiting the site a month. What I didn't know was how to monetize that traffic. It was after I worked in TaxiForSure that I learned about the startup ecosystem," says Nagarajan. "I learnt about funding, how to scale without cash burn," he says. Ninjacart is Nagarajan's fourth venture.
"My first was a CFA coaching institute, FinIsFun, but the working hours were gruelling and the returns weren't worth it. So I tried to open a Fresh Menu type venture called Appatakar biriyani, but had to close due to police pressure," he says. It was joining TaxiForSure that made him realize what he wasn't doing right. "The TFS startup ecosystem and its founders helped me start right again," he says. Ninjacart bagged $3 million in funding this March.
Focusing on the problems of early stage failures is Axilor Ventures, started by S D Shibulal, Kris Gopalakrishnan, Ganapathy Venugopal and Tarun Khanna. "Typically, when one asks a founder about the idea, it is something no one wants or an idea the founder wants to perfect for himself," says Venugopal. "What is crucial is to understand the problem that one is trying to solve and gauge willingness to pay."