‘Startups’ — A word that everyone gets excited these days, isn’t it? Something that comes to mind at first — own boss, will become rich, people will work under you, CEO title, and more. But the truth is, it is not as cushy as it appears though, and a lot of challenges startup will face. I have done a few startups in lifestyle, education, dating, classifieds, media, etc, and a few of them were good enough, a few were total failures and a few were pivots as well. In my last few years of experience, I have gone through all good, brutal, and bad phases but truly, it was an awesome and immense learning experience.
I have seen the changing developments in the startup ecosystem very closely and have been part of those developments too. I do feel 2017 will be more challenging than 2016 but it will be the year of execution, big exists, M&A, new growth milestones, sustainability, innovation, IPOs, and a lot is going to happen in 2017.
I think there are the top 10 challenges that every startup is likely to face in 2017:
The shift will happen more on profit-based businesses that will provide an edge for linear growth. The focus will be on getting more profit and re-investing the same to continue the product or startup. The challenge will be to build the right businesses rather than just doing the startups. Building businesses out of the startups would be the focus in 2017.
The key to success will be bootstrapping for a longer time. Raising funds is getting higher so bootstrapping will be encouraged more. Startups need to plan for the bootstrapping very seriously else need to be ready to fail.
The growth economics for any business or startup will matter in 2017 more than GMV or expansion. The consumer spending vs the profit will make more sense than just GMV. The challenge will be to build a business based on the right unit economics. Spending would be needed to reduce to a significant amount. LTV, Margin, CAC and Net Profit will matter a lot.
The right talent is getting more costly as the value of knowledge has increased than a degree. The emerging & cutting-edge technologies are going to be the focus in the next few years and the availability of resources is less. Therefore, because of the supply and demand gap, the cost will be higher.
The industry focus has been shifted to automation, intelligence, and insights whether it is manufacturing, travel, or eCommerce. The small startups will have to face this because for them it will be tough to hire such costly talent. The sharing economy is growing though but it is not effective in technology development yet.
On the other side, the cost of living, traveling, and eating have increased multi-fold as well. Startups are required to plan quite carefully while hiring talent. Not Degree will matter, but skills will matter in the coming time.
No doubt that in 2017, funding is going to be literally tough. From 2015 to 2016, 50% of the funding has been reduced already. The trends suggest that funding will be more on the unit economics side than just idea. Startups really needed to work hard to innovate and scaleable ideas that are capital efficient.
Get ready to face the ‘sharp & fierce’ competitor. With the high growth in a number of startups in both tapped and untapped sectors, it is not going to be easy to stay in the competition if not have an edge over innovation and defensive strategies to compete. Differentiation over high barriers will matter in the coming years.
No matter what you build or execute, innovation is going to be the key to the success of the product or startup. If the business or startups are being built just following the Western trend or copy-paste, it is not going to work at all. That time is over now and only innovation and the key of executing that innovation is going to matter a lot. Millions of people are building innovative products or technologies and in that case, your execution will be the next key for success over innovation.
The fundraising will be realistic based on the real valuations. The investors are not going to throw money like in 2015 again. The investment will be based on your unit economics & sales rather than just building the product or business. Be ready to face the significant reduction in the existing valuations and also the new valuations will be totally realistic only.
2017 will be a year of disruption in many areas and hence copy-pasting of ideas will not survive. The startups that will be built on copy-pasting model, will not work at all. The re-inventing of the wheel is going to cause disruption rather than copying the idea.
Indian tax regulations have significantly changed in 2016 with include of multiple taxes & liabilities. The startups are going to pay a lot of taxes that were not applicable in 2016. For small startups to big enterprises, this challenge will be there with some easiness due to the GST Bill (if executed on time and properly).
The change will be there for sure. Each year teaches something good and bad but both the lessons of life are needed to be learned. The coming 2017 is surely going to be a great year in terms of development, execution & disruption. The year is going to be more exciting with lots of new learning.
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