I have been part of the electronics and embedded software industry for last two decades. I had some great opportunities to work with many of the legendary companies as well as start ups in the Indian market ecosystem and also couple of “export only” companies. I have been observing them in the capacity of being a “Supplier” or “Technology Partner” to them. I have observed companies started by college students, young and ambitious engineers, seasoned and mature engineers, highly successful and decorated managers and technocrats of multinational companies, returning non resident Indians, even the industry leaders after the end of their corporate life. I have seen these businesses succeeding, sometimes failing, often shutting down, and merging with other companies or getting acquired.
As I see, there are some hygiene factors needed to be in a position to start one’s own business or company. I often call them as Passion, Desire or Ambition or Motivation. I am not going to dwell upon these hygiene factors. I will consider these as given.
Next comes, the two main inputs “Idea” and “Cash”. The so-called founders of the company provide these two fuel elements to spark the business or the company. Without these two, no business can start, sustain or grow. The “idea” is the independent variable and “cash” is dependent variable. Richness of the Idea depends on its uniqueness, originality, the problem it solves, the needs it fulfills, the experience it provides to the users, replicability and scalability.
We can use a graph with Idea on X axis, Cash on Y axis and position the companies / businesses on this graph. To generalize four different quadrants are possible.
Idea Rich – Cash Rich: There is little doubt that the company in this quadrant would succeed in making it, survive and thrive.
Idea Rich – Cash Poor: If Idea is indeed rich and path breaking then raising cash will not be a major issue. There are many angel, independent and private investors as well as venture capitalists out there, which can fund the ideas for converting them into the business.
Idea Poor – Cash Rich: This is like a spoilt brat, most likely will end up as a cash burner and will end up in the lower quadrant eventually.
Idea Poor – Cash Poor: The companies in this quadrant would eventually shut down.
Original Ideas when patented will create entry barriers for others to compete by preventing duplication of the idea. It can also generate money in the long term in the form of profits from business (based on the patented idea) as well as from sub licensing the idea to other companies who want to be in the similar business.
Once the Idea and Cash are secured, and then comes more hygiene factors like infrastructure, tools and people resources. These can be mobilized by using the cash and generally not as critical as Idea and Cash itself.
Most important ingredient which makes the company with Idea and Cash, successful is “Execution” With excellent execution superlative results can be achieved with same IDEA and Cash. Execution will add third axis of measure towards the previous graph and thus results in 8 different combinations. The most visible ones because of probability of success will be Idea Rich – Cash Rich – Execution Rich type of companies. These companies will not only survive, but thrive and become a market leader.
I have also observed that no company remains in the same box for ever. As ideas die, cash reserves drain, execution often suffers. With poor execution, a company with great idea and cash can vanish from the market.
In my personal view, some first generation entrepreneurs with subject matter expertise (who were working for others previously or are students) , tend to start in the Idea Rich – Cash Poor box, but manage to raise the funding and then with good execution can make it into a successful business.
Last few years have seen many start ups coming out of academic institutions in India. These students often start in the Idea domain and lack cash as well as execution. Some of them have managed to learn the trick of the trade and have turned up successful after few years of struggle.
I have seen successful technocrats starting with an idea which is too far forward into the future or a run of the mill type. In both cases after burning the cash (often own investment) they have not been able to attract more investments for scaling up the company or business. These companies often end up as an M&A candidate, ending up with the entrepreneur often returning to the job market once M&A is over.
Some established companies with good businesses and track record have ventured into a new business due to herd mentality (Idea Poor-Cash Rich-Execution Rich) and often ended up with me-too type of positions (in terms of market share and profitability) at the bottom.
Of course the companies in the Idea Poor – Cash Poor – Execution Poor box will never be visible as they die most often before they are born or at best immediately after the birth.
I have also seen some people call themselves Serial Entrepreneurs, Initially was not aware what this means, but later realized that they are in the business of finding an idea, forming a business plan, raising a company, execute (to a varied degree of success), and at right valuation exit the company by either selling the company/business or doing a merger and cash out.
Bottom line is entrepreneurs keep coming; they will be working in the space of Ideas-Cash-Execution. Some end up High, Some end up Low. What is important is this process should continue. I am sure that no time is a bad time to start working on a new Idea. But before burning cash on an idea, need to be sure of its growth and sustainability.
It needs some hard as well as smart work to get it right.