The Art of a Good Unicorn | Is story bias affecting India's startup environment?
Despite India's emergence as a startup powerhouse, we need to destigmatise risk and failure. Entrepreneurial resilience is the real deal
Whether we like to admit it or not, we prefer to look at the world through rose-coloured glasses. We secretly hope that every marketing story is true, that things happen the way people say it happens and that all the achievements out there come together without any struggles. Sometimes, it's better to pretend this is all a Karan Johar movie: There's happiness and joy and dancing and love, but sometimes, there's sadness as well.
This kind of puppies-and-sunshine mindset may reflect in the way we look at our startups in India as well. Entrepreneurs have turned into millionaires and billionaires. Because who doesn't love the story of the underdog: The person from a small town or city making it big? Despite some of the pessimism, the media coverage seems ebullient, investors seem eager and the government seems to be putting in efforts to bolster the ecosystem.
As of October 2023, India is said to have emerged as the third-largest ecosystem for startups globally with more than 110 unicorns and a lot of high valuations. And with that kind of achievement, the narrative may be to celebrate India's startup ecosystem as a burgeoning empire of entrepreneurship and innovation. There's a very colourful picture being painted where innovation thrives and one's entrepreneurial success is just one pitch away. But the truth is: it's as Elon Musk described: "Running a startup is like chewing glass and staring into the abyss. After a while, you stop staring, but the glass chewing never ends".
Is there a sense of over-romanticism that's fogging up the glass? It's said that about 90% of startups fail within the first five years. And it's said that first-time entrepreneurs have an 18% chance of success. This could be due to running out of cash, not gaining sufficient market share or maybe, a lack of market acceptance, even if the startup is built on great ideas.
There are some sobering realities that startup aspirants must pay attention to.
What people may not be focusing on is that for every successful startup, numerous others fail and, in the aftermath, the founder is left with debt and emotional damage. Securing adequate capital may not be as feasible as it is made out to be. Sure, at some point during the Covid-19 pandemic, funding was profligate, but the mood has tempered since then. And even then only a handful of startups in a handful of sectors may receive a lion's share of that funding. Even if there is funding to be received, startups may overlook having a sustainable business model, which could erode investor confidence and patience. At the same time, founders have to keep abreast of regulations and tax complexities. On top of that, hiring talent could be tough, especially with higher salary expectations that may be suitable for a corporation, not a burgeoning venture.
Something like Shark Tank India could lead to the misunderstanding that starting a startup is ‘easy, fun and cool’. Check out the show. The suits. The colours. The intriguing music. All of it somehow forms an image in one's head that this sounds like this could be a ball and that innovative ideas could easily become lucrative businesses. Sure, Shark Tank India could be credited for popularising entrepreneurship in India, but it may be painting a simplified picture of the startup ecosystem. Hearing someone passionately talk about their startup for 10 minutes may not make someone realise the troubles and hardships it took to get to that point: Figuring out product-market fit, making multiple pivots, getting employees to work with you, keeping an eye on the burn rate, client retention, perhaps laying off employees, if push comes to shove and still continuing to represent their startup. Even after all that, there's no guarantee the startup will become successful.
The complex and gruelling process of building a startup from scratch still remains, kind of, hidden. And sustainable growth could take time: it could be slow, steady and strategic. So, the SharkTankisation of India's startup ecosystem could be distorting reality.
Look at how we create stories. We weave it from our imagination and there's an allure to a crafted story, even capable of transporting people to magical and picturesque realms. But, beneath that degree of fantasy and mysticism, there's a kind of paradox: Stories may be spurious entities, just a lens to interpret the world and try to make sense of it all. They may be a way to craft neat narratives. Yet, even the most rational people may gravitate towards simplifications and distortions. Maybe, because stories have been an integral part of the human experience since time immemorial, maybe even before rational discourse and scientific inquiry. As a species, we have an enduring fascination for storytelling.
And yet, that kind of affinity may have led to a story bias. That's where we, as a people, tend to perceive and interpret the world in a dubious and biased manner, colouring our perception of the world, shaping our beliefs, influencing our decisions and maybe even, lulling us into a false sense of security.
So, we may be suffering from a story bias in presenting these ventures. And that might lead to a very wrong picture being shown. Shark Tank India may be exploiting this narrative: the dream of achieving big too fast. But, that's just what it may be: a dream.
Or take the US version of Shark Tank, for instance. Every now and then, they highlight the story of a company that pitched in previous seasons and got a Shark and showcases the success story of that startup. On the other hand, there may be companies who have come on the show, received an offer and later, met their demise, but those stories would certainly not be showcased, as they're not in the best interest of the show. Thus, here is a skewed perception that success is the norm, when it may actually be the exception.
So, while there's a lot of value in starting a startup, maybe some folks may be better off taking a job at an established company. It's not like there's, also, immense learning that can be gained by working in a solid company: they're the result of years of mistakes and triumphs. Maybe, for some, a detrimental pursuit of entrepreneurship may impact the founder and even their family, due to a lack of monthly monetary security.
Yet, entrepreneurship is about embracing failure, learning from setbacks and persevering through challenges. None of this should discourage anyone from wanting to start a venture. It's more about being mindful of the pitfalls and mitigating the information asymmetry.
There is a new generation of entrepreneurs out there, who must recognise the drawbacks of what they wish to do and face harsh realities. Perhaps, it's time to look beyond the glamour of a TV or a phone screen and prepare for the real-world challenges of building a startup.
Startups are about taking a level of risk that can either reward or wound. What needs to become mainstream is eliminating the stigma around failure. Success and failure ought to be spoken about in the same breath and afforded the same respect.
Here's to celebrating failures. Only then could we become a true startup economy.
Shrija Agrawal is a business journalist who has covered startups and private capital markets before it was considered cool in India.
The views expressed are personal