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Entrepreneurs Trilemma

A smart entrepreneur always educating her/himself on the innumerous possibilities disconnected from their own day to day business and taking the right call on which distraction to turn into an opportunity.

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Who is an Entrepreneur?

An entrepreneur could be any or combination of: inventor, first to attempt to bring an idea to reality, source of ideas / concepts, innovator, provider of goods or services; an individual who starts a new business and risks the seed capital towards growth of the business.

Entrepreneurs play an essential role for economic and social development of any country. Apart from the financial impact of their ventures, they also generate jobs and create a sense of optimism in the society. With their ability to raise funds with risk-discounted equity and to serve customers with constantly evolving competition, they do set benchmark for true industry standards, even for an existing one or a new sector. For every successful entrepreneur who is celebrated in the market, there are probably over 1,00,000 entrepreneurs who attempted and failed, and are unsung. An entrepreneur can be a wonderful growth-catalyst for an economy. Every new venture provides for capital formation, making a positive impact on societal acceptance of newer idea and more importantly the utilisation of human capital.

Encouraging entrepreneurship is a good way to engage with large sets of population, especially the youth. Every successful new venture that scales up well, has a direct positive impact in encouraging new entrepreneurs in believing in that concept. For every successful concept, an entire value chain of products and service companies start-up and hence create a networked-entrepreneurship model.

Existing businesses may remain confined to their markets and eventually hit a revenue ceiling. New products / services and new innovations generate additional headroom of public spending and this induces economic growth. For instance, consider the online gaming companies - the lack of avenues for entertainment encourages consumers to adopt pocket- sized entertainment measures like casual gaming and fantasy gaming which is bite-sized in cost but with large volumes is driving a rapid growth in this industry.

The Indian startup ecosystem in this century

Indian startup ecosystem has come of age. While India has always been an entrepreneurial ecosystem (even Infosys, Wipro were startups at some point), the first wave of venture funded startups started in 1999-2000. Since then, there has been a sea change in the opportunity set, capital availability, talent, regulatory support, exit environment and everything related to the ecosystem.

After a failed start in the 90s, the real start of the startup ecosystem happened around 2004-05 with the booming markets. Since a humble beginning of around a few hundred million US dollars invested a year in the early stages, today India witnesses over $35 b in investments in the PE/VC space. Within this, early stage startups account for over $2 billion annually. The underlying opportunity set is growing by nearly 200-300 companies being registered every day. Even assuming hardly 10% of these are truly entrepreneurial ventures (and not subsidiaries of other firms), we are looking at over 500 companies opening up each month. There are roughly 800 - 1000 Indian companies getting venture investment each year. Yet, this is hardly 10% of the investments seen in the US - showing enormous headroom for growth.

From a nascent market with limited exits in the past, the last few years have shown the strength of the Indian startup ecosystem with exits for investors - be it VCs or angel investors. Exits are a crucial link to a sustained startup ecosystem as angel investors and institutional investors are able to plough back the proceeds into new investments thereby nurturing the ecosystem further. 

The average age of founders has fallen drastically from around 40s in the first decade of this century, to around early 20s now. This is significant to note - there is no more a stigma attached to a high failure rate option like starting up. The market today sees serial entrepreneurs in their 30s startup up their 2nd or 3rd venture.

With India now having the second highest number of internet users in the world, there are numerous India-specific business opportunities that are opening up. Gaming and pocket-sized entertainment is one of the fast growing opportunities which needs localization to make it monetizable. The growth of fantasy games around cricket is a telling example of this.

Similarly, consumer apps that improve the lives of SMEs are going to be big. Digital finance is another area where many young as well as experienced professionals are creating newer sachet-products for India, not limiting it to only urban pockets.

Making of an entrepreneur & their lemmas :

An entrepreneur, apart from many of their qualities and personality types have these capabilities that set them apart. This allows them to compete even when their ideas are seen as audacious or being ridiculed.

● Staunch conviction about their idea; that they can be mistaken for being adamant and arrogant

● Innate ability to multi-task almost 24x7 with signs of frenzied energy; that it can be mistaken for helicopter-leadership

● Emotional strength to deal with rejections or disappointments and criticisms repeatedly; that people mistake the personality to be “thick skinned”

A trilemma is described as “a situation in which a difficult choice has to be made among three alternatives, especially when these three are equally favourable or equally undesirable.“

The famous science fiction writer Arthur Clarke cited a management trilemma encountered when trying to achieve production quickly and cheaply while maintaining high quality. A service industry typically has the challenge of wanting to be the quickest-to-the-market, with highest-quality-parameters and at lowest-cost or highest-margins. The management strategies of firms differ in the way they see the above variables. Some of them see it as dilemma to resolve and some of them choose it as a trilemma. The outcomes determine their market choice.

Entrepreneurs are constantly encountered with three key priority aspects to choose from:

● the staunch conviction which keeps them going with no regard to what anyone thinks,

● the constant feedback / opinion that dissuades them from pursuing the path for the risk of failure.

● keeping an eye out for that alternative path to decide when to take that right turn, away from the push and pull! 

Irrational optimism is a very important element to visualize the big picture which nobody else is able to see and drive towards that direction. In their quest to accelerate towards this grand vision, entrepreneurs cannot ignore the market feedback coming in every moment of the journey - however succumbing to the feedback (which more often than not focuses on why its a bad idea) and stopping short is not an option. However if the feedback is indeed valid, it is better off to stop, re-check and re-start. This internal push and external pull is a constant dichotomy faced by entrepreneurs. The most interesting of the lot is the ability of the entrepreneur to constantly watch out for adjacencies and completely disconnected ideas which sometimes throws open new possibilities, which were never thought before. One could see these as distractions or opportunities. A smart entrepreneur always educating her/himself on the innumerous possibilities disconnected from their own day to day business and taking the right call on which distraction to turn into an opportunity.

This trilemma of accelerate forward, apply brakes or take a right turn is a very important framework to bear in mind as one navigates the interesting journey of starting up. As the saying goes, entrepreneurship is at its best when experienced as a journey, than chasing the  end-goal alone!

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Srinath Sridharan

The author is Independent Markets Commentator

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Karthik Prabhakar

Venture Capitalist

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