Most Common Issues Facing Startups Today

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Most Common Issues Facing Startups Today

  July 1, 2015

At the Tandon Group, we’ve heard at least two startup investment pitches a week over the course of the last 40+ years. We’ve invested in promising startups and passed on countless pitches that didn’t convince us of likely success. In that time we’ve come to recognize common issues that many companies face. Our hope is that by divulging these issues future startup founders can avoid them.

Knowing what not to do can sometimes be just as important as knowing what to do. The issues we’re going to discuss are a major enemy to any startup’s success. In his classic The Art of War, Sun Tzu remarked, “If you know the enemy and know yourself you need not fear the results of a hundred battles.” As a startup founder, you’ll be forced to face hundreds of “battles” in the pursuit of growing your company. Remember this fact before you start and it’ll save you a lot of stress over the course of your career. If you can avoid the common issues outlined below, you too might build the next million (or billion) dollar company.

  • Issue #1: Doesn’t solve a problem. By far, the number one mistake startups make is building a product or service nobody needs or wants. “Cool” and “quirky” ideas may be fun and even attract notoriety but if that same idea doesn’t solve a problem or make someone’s life better, the novelty will eventually wear off. All successful businesses either solve a problem, improve an existing solution, or create a new market all by themselves.
  • Issue #2: Lack of sales. Some startup founders think that a large user base is all they need to be successful. Unfortunately, that isn’t true. While a large, million-person user base can result in a large startup valuation, it isn’t until the company finds a way to extract money out of users that the company produces a profit. Great startups always have an end-goal for producing revenue from their users. If you have an awesome product or service you deserve to charge for it in some way.
  • Issue #3: Undercapitalization. This point is tied directly to the previous issue. A startup being undercapitalized (not enough money) is the direct result of not enough sales. If a company is always producing sales in excess of their lost customers they would never go out of business. Most startups need to solidify their revenue generation strategy before they try to expand further. We see this problem even in popular services like Soundcloud which, according to recent reports, only has enough cash to survive 50 days.
  • Issue #4: No true leader. When multiple co-founders are involved in startup things can get tricky. Miscommunications, disagreements and large egos can all get in the way of running a successful business. Defining a single leader and true CEO is the only way to structure a company so that decisions (and progress) can be made. This can be one of the hardest conversations you need to have but it can also be the most beneficial.
  • Issue #5: “Copycat” business. “We’re the next Facebook…” or “We have the same business model as…” are phrases used all too often in the startup world. If you define your business in terms of how it relates to another business, you don’t have a unique selling proposition. Why is your business different? Why are you unique? You need to be able to answer these questions without even thinking about it. The live-streaming app Meerkat was a perfect example of a company that raised a lot of money, wasn’t truly unique and ultimately went out of business.
  • Issue #6: Poor customer service. The customer isn’t always right, but that doesn’t mean you should ignore them. The purpose of a business is to gain and keep paying customers. Some startup founders believe that customer service is somehow beneath them when, in fact, it’s one of the most important things they could be doing. Upset customers will tell you everything you need to fix, what they don’t like, and what you could improve in your product or service. Happy customers can provide invaluable testimonials that help sell your product to more people. Either way, you can’t ignore feedback.

If you’re able to successfully avoid these major pitfalls within your startup, your chances of success will dramatically increase. The Tandon Group is always interested in helping growing companies get to the next level. If you’re looking to raise capital for your business or expand your offerings within the Indian market please reach out to us. We’d love to learn more about your company and see how we can help.

Tandon GroupMost Common Issues Facing Startups Today

Is Your Business Idea Feasible? A Checklist for Entrepreneurs

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Is Your Business Idea Feasible? A Checklist for Entrepreneurs

  June 8, 2015

Do you watch Shark Tank? If you do, have you ever noticed when an aspiring entrepreneur pitches an idea and you think: “Hmmm, I don’t think that’s a very good idea.” And the next thing you know every shark is saying: “No Deal.” Well, if you’ve ever seen that, imagine how bad it must feel for the entrepreneur to hear those words. With that in mind, we’re going to show you a set of rules many VC firms use when considering an investment. How many check marks does your idea have?

1. Does Your Company Solve A Real Problem?

The greatest sin entrepreneurs make is inventing a solution before solving a problem. We get it, you have the hustle and persistence, but at the end of the day. Are you really helping your customers solve a tough problem? If you can answer with a resounding “yes” then you’re well on your way.

2. What Is Your WHY For Launching This Idea?

Another way to phrase this question is: are you capable of doing this business idea? Simon Sinek is an author who asks one simple question: “Why are you doing this?” The reason is simple. What is your motivation to launch this idea, and will it keep you going when “the going gets tough”? Here’s a sad reality, if you think entrepreneurship is easy then you have it completely wrong. Running a business can be harder than you imagine, and if you want to make it through those rough patches you need a why which deeply motivates you.

3. How Fast Can You Execute?

In the world of business, there’s a simple motto. Execute, Execute, Execute. VC’s need to know how quickly your idea can become a reality. Additionally, they have to trust that you have the chops for pivoting when needed and can make adjustments as the data comes pouring in. The questions to ask are: “Is this an R&D project which will need funding to get the technology just right? Is this idea easily tested by the marketplace? What resources will I need to get my first version going? How long will it take to get my first sale?”

4. Do You Have Competitors In The Market? If So, What Are They Doing?

Business Insider wrote a fascinating article back in 2010 about the overrated myth of “First Mover Advantage.” In the article, he said: “First Mover Advantage — Great Bad Idea” and “Fast Follower – A Better Idea.” In the article, he also cited a study that showed 47% of First Mover Businesses failed and only 8% of Fast Follower Businesses failed over the long term. Here’s why: if you have competitors the solution is validated because there are people who are already paying for that very solution! This is great news for you because now you have an addressable market to sell your product. However there is a caveat, you need to know everything about your competitors because you’ll need to carve out a niche for your business to be successful.

5. Can The Business Be Described Simply?

If you need 2 hours and 100 slides to explain your business idea to somebody then your idea is too complex. People thrive on simplicity, and like the famous quote goes: “If you cannot explain it simply, you don’t understand it well enough.” The rule of thumb is this: If you were in a stadium crowd of your perfect customer audience, what would your businesses headline be to grab their attention? Normally this means concentrating the idea into 25 words or less, breaking it down to its bare essentials. If this is next to impossible for you, it may reveal a fatal flaw in the idea.

6. How Quickly Can You Monetize This Idea?

It’s interesting that the above question isn’t asked by many new entrepreneurs, but it’s the one every venture capitalist investor is thinking about. How quickly will I see my money back? This is where you need to get technical and deeply think through this problem. It’s important to have an accurate runway of your business idea so you can convey to potential investors that choosing your idea is a win-win for all.

The Bottom Line

As an entrepreneur, your dreams probably reach well over the $1 billion mark, and we hope it happens! However, remember that proper planning could mean the difference between a successful business, and an embarrassing failure. Use the above checklist to exponentially increase your chances of hitting a homerun! If you’re working towards being an influential entrepreneur then contact The Tandon Group. We’ve invested in the dozens of high-growth startups in the wireless, consumer, defense, and information technology sectors, across the globe. We’ve had successful exits and helped grow companies to millions of users, and you could be the next shining star.

Tandon GroupIs Your Business Idea Feasible? A Checklist for Entrepreneurs

7 Enterprising Lessons from Tandon Group on Tackling Staffing Woes

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7 Enterprising Lessons from Tandon Group on Tackling Staffing Woes

  June 1, 2015

Before Tandon could become the preferred supplier for IBM’s floppy disk drives, M.L. Tandon had to solve an urgent problem. Finding reliable workers. When M.L. opened Tandon’s first plant in 1978, he faced three significant staffing challenges:

  1. Indian engineers and workers at the time had no knowledge of the technology standards to manufacture floppy recording heads and drives
  2. Because the men who typically filled assembly positions in India could find jobs anywhere, they weren’t loyal to one company
  3. Training this existing labor pool proved costly due to the high turnover and the workers’ lack of experience with international production standards

In a bold move, M.L. Tandon decided to create a skilled workforce from scratch.

“I wouldn’t hire men,” he says. “Women, on the other hand, were an untapped pool of industrial talent. They have a strong work ethic, loyalty and superior manual dexterity for high-precision electronics.” Tandon also recruited high school graduates and dropouts. Since they didn’t have prior experience, they were easier to train and eager to learn higher production standards from the outset.

While today’s startup ecosystem in India is dramatically different from Tandon’s early days, hiring the right talent and staff for your business is still one of the biggest challenges founders face today. Whether you’re recruiting workers or acquiring talent, the people you bring in can make or break your business. To ensure you’re building a solid foundation, consider taking a page from the Tandon Group when it comes to hiring employees.

  1. Don’t compromise: Like many startup founders, Tandon needed workers fast. M.L. was able to hire the former IBM India employees when he took over the plant after IBM was forced to close in 1977. It would have been fast and easy for Tandon to hire the men who were already filling entry-level assembly positions at the time, but in the long-term, it would’ve cost the company significantly in terms of time, money, energy and morale.
  2. Search for employees beyond the usual sources: In today’s world, we have no shortage of sources to find people — career portals, job boards, recruiter websites. But you may find the best people where you least expect it. While technology, recruiters and staffing firms make it easier to connect with candidates, be open to the workforce or cultural trends and look for opportunities to tap into different talent pools.
  3. Hire for trainability, passion, and positivity in addition to skill: Not only were the young women that Tandon hired open and eager to learn, they too valued the opportunity and took pride in their work. During one of Tandon’s annual employee art exhibitions, a female employee displayed a picture of a sick man lying on a cot, surrounded by three starving children and the words “I wish I had a son” (to earn money for the family) on the portrait. She made another picture that showed the same man and children, this time happy and with a platter full of food. The words on her second picture said “I don’t need a son because my daughter works at Tandon.”
  4. Have a set of cultural values to hire for: Some people are so set in their ways, they won’t get behind your values. So be clear about what your values are so you can evaluate candidates for a cultural fit in addition to their skills and expertise. Respect for individuals was a guiding value that M.L. Tandon took away from IBM and integrated into his own company culture. It was also quite uncommon in India at that time since many of the companies treated workers differently than managers. India also had a reputation for producing poor quality goods. Not in Tandon’s plant though. M.L. saw first-hand how corporate efficiency and flawless quality put IBM at the top of the global market and he wanted that for Tandon too. Instead of the typical “chalta hai” philosophy of “good enough”, M.L. would tell workers “chalta hai, nehi” — chalta hai isn’t okay — whenever he walked the production floor.
  5. Hire people you like, but who aren’t necessarily like you: Hiring people you like to work with goes along way toward creating the right kind of company culture. But many business owners make the mistake of hiring their clone. When you’re growing a business, keeping conflict to a minimum is a logical instinct. However, hiring people with different but  complimentary skills, strengths, perceptions and even personality will be better for your business in the long run.
  6. Be accessible: For M.L., quality means continuous improvement. He believes the best way to accomplish that is to instill a sense of empowerment and respect at all levels. By instituting an open door policy for any employee and working in collaboration with employees to solve problems together, M.L. has made it clear that everyone at Tandon is important.“I want my workers to feel like Tandon is just as much their company as mine,” he says.
  7. Foster opportunities for creative and critical thinking: Hire resourceful people who enjoy tackling tricky problems, then give them the opportunity to do so. Critical and creative thinking forces employees and managers to look at situations in different ways, evaluate solutions that may not have been thought of by an individual alone and come up with the best solution. By fostering opportunities for creativity and critical thinking, Tandon has been inventing, innovating and finding solutions to problems since its inception. Encouraging entrepreneurship among its employees and mentoring talent for the future remains Tandon Group’s passion.
Tandon Group7 Enterprising Lessons from Tandon Group on Tackling Staffing Woes

Criteria for Selecting the Best Candidate for your Startup

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Criteria for Selecting the Best Candidate for your Startup

  May 1, 2015

Startups that succeed start lean and it’s a mindset you need to have because the wrong employee is incredibly expensive. The U.S. Department of Labor estimates that the average cost of a bad hiring decision can equal 30% of the individual’s first-year potential earnings. If you’re a startup with little to no sustainable income then a wrong employee ranges from disastrous to fatal. Not only does a wrong hire waste productivity, but it can also actually cause surrounding employees to lose effectiveness. [1]

Below is a good checklist for hiring new employees:

1. Make your job description clear: Often the determining factor when hiring the wrong employee is an unclear job description. It’s crucial you’re crystal clear about what exactly the job entails, with a detailed description of how the employee is expected to perform. In addition, you must know exactly what type of person fits the job description well. Every employee is just as important as your technology.

2. Keep a record of potential employees: You need to track each candidate, including their strengths, weaknesses, expectations, and interview notes. Throughout the hiring process this information becomes valuable when you begin to cross names off your list.

3. Run background checks: It’s highly recommended you run a background check on every employee. Ensure you have a consistent policy in place so every employee knows what is being checked. For instance, as the founder, you’ll want to run a background check that reviews criminal records, driving records, and any watch lists. It’s also recommended to run a check of credentials and/or credit score.

4. Know your EIN: Once you’re ready to hire employees you will need an Employer Identification Number (EIN) from the IRS. An EIN is required to pay business taxes based on the number of employees you have. You only need 1 EIN number which covers the entire business.

5. Have your taxes in order: Every business in the U.S. must keep records of their taxes. Each business is required to withhold money from every employee’s paycheck to ensure taxes are paid correctly. There are two forms that must be completed: W-4 and W-2. The W-4 form is used for every employee and it must fill out before they begin work. This provides you with the correct information for taxes. The W-2 form is sent to the employee and the IRS. It shows all taxable income including retirement contributions and benefits.

6. Have a proper payroll system: There are two options for this. Do payroll internally or outsource to a company like Workday or ADP. Either way, make sure you’re addressing your business’s payroll needs.

7. Obtain business insurance: All businesses with employees are required to have workers’ compensation insurance. You can do this through a couple of ways, the most common are to have a broker, self-insure, or through your state’s Workers Comp Insurance Program. Many startup founders neglect to buy insurance until it’s too late, and they’re forced to pay out of pocket for issues that will eventually happen. Don’t let that happen to you.

8. Keep a file on every employee: It’s vital to keep information on file for all employees. This provides the company with a barrier for any problems which could or could not occur. For instance, some of the data you’ll want to keep is the full name, address, emergency contact, a copy of the signed contract, and any reprimands or accolades within the company.

This checklist provides you with all the necessary steps to onboard a new employee. Your staff is crucial to the company’s success. Nobody can run a business in a vacuum, and now you’ll know what to look for and what to avoid. Good people are difficult to find, but if you’re at this stage then luckily you already know what you’re doing.

To learn more about our company, please contact us.

Tandon GroupCriteria for Selecting the Best Candidate for your Startup

Your Startup Will Probably Fail and That’s Okay

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Your Startup Will Probably Fail and That’s Okay

  May 1, 2015

You’ve probably heard the saying that “90% of startups fail.” Well, after tracking over 27,000 startups over 20 years, Cambridge Associates says that the amount of startups who provided less than a 1x return to investors has not risen above 60%, on average. The failure rate peaked around 2000 and the failure rate topped out around 79%. Either way you look at it, even at its worst, the startup failure rate was never more than 80%.

So why do people keep repeating the “conventional wisdom” that 9 out of 10 new businesses fail? It may be to lessen the blow when new startups inevitably do fail, it may be because people actually haven’t looked into the numbers, or it may be to discourage people from taking risk. Regardless, the fact remains, if you start a company the odds are against you. On a purely statistical average, there’s a 60% chance that your company is going to provide less of a return than any amount of money put into it.

Top reasons why startups fail

If you read our previous blog post- common issues we see in startups today – you’ll see that the top 6 most common causes for failure are:

  1. Your product or service doesn’t solve a problem or address a real need
  2. You are unable to sell your product or service
  3. You don’t have enough money to expand and grow your business
  4. You have no true leader to shape the vision of your company
  5. There’s no differentiation between you and your competitors
  6. You don’t care enough about the customer experience or customer service

Almost all of the reasons that a startup fails can be categorized into one of those 6 issues. It can be very difficult for a first-time entrepreneur to avoid these common pitfalls because most people do not truly learn something until they experience it firsthand.

REAL reason startups fail

Almost all of the problems we listed above arise from lack of experience. That doesn’t mean that first time entrepreneurs can’t be successful. It simply means that it’s hard to foresee all the potential troubles that lie ahead until you’ve been there before. Experienced entrepreneurs anticipate running into these problems and proactively build their organization to overcome them.

There are two ways to overcome a lack of experience. The first is to simply go directly into business and learn along the way, anticipating inevitable failures. Most failure is not permanent or catastrophic and therefore, can be learnt from. The second way, to make up for lack of experience, is to learn from others. Build a team of experienced people around you that can help you navigate the complicated start up process.

Why failure isn’t the “end of the world”

Failure is never permanent unless you quit. An entrepreneur can always try again. As long as you are ethical and moral, people will not negatively judge you for an earnest attempt. If you tried your best and failed, try again. As long as you keep your reputation intact, there’s no need to fear failure.

Entrepreneurs who failed but tried again and succeeded

There are countless entrepreneurs who failed multiple times before they succeeded. In fact, the majority of great entrepreneurs fail before they meet with success. We think it might be helpful here to highlight some of the more obvious examples of entrepreneurs who failed but got up, tried again, and built a successful company.

Jeff Bezos (Amazon) tried to start an online auction site called zShops, which ultimately failed. Reid Hoffman (LinkedIn) created a company called SocialNet, for online dating and social networking, which ultimately shut down. Evan Williams (Twitter) developed a podcast platform called Odeo which didn’t take off. Fred Smith (FedEx) received a poor grade on an assignment from his college professor where he pitched his idea for the future shipping giant.

All of these entrepreneurs have one thing in common, they didn’t give up. No matter what, even if you’re first companies fail, if you try again, you still have the chance to be wildly successful. Our hope is that failure doesn’t keep you out of the game -of entrepreneurship- for the rest of your life.

Are you the type of person that never gives up?

At the Tandon Group we are always looking for entrepreneurs who refused to quit. If you have a company that you think can be the next big success, reach out to us. We’ve invested in dozens of startups across many sectors that have seen success. You can check out our portfolio of companies on our website and read some of their spotlight articles on our blog. If you need capital to grow your company, we’d love to be your partner for the road ahead.

Tandon GroupYour Startup Will Probably Fail and That’s Okay

Indian Crowdfunding Opportunities

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Indian Crowdfunding Opportunities

  May 1, 2015

Prior to having a proof-of-concept, raising capital for your startup can prove very difficult. Most professional and institutional investors want to see working products and market validation before they’re willing to invest in any capital. This can turn into a paradox — you need money to build your initial product or service but you can’t get money without having an initial product or service. There are ways, however, to raise capital and prove your concept, at the same time.

What is crowdfunding?

Crowdfunding essentially lets you raise money from future customers (or fans), prior to building your product or service. These micro investors, commonly known as “backers”, pledge money to your cause in exchange for one of the first products, to gain access to your work before anyone else, to be recognized as a backer, or any number of other creative reasons. 

Why has it become popular?

Crowdfunding has become popular in recent years due to the fact that you can start a company and prove the concept, without risking almost any assets. Another reason crowdfunding has become popular is that you do not give up any equity in the company in exchange for the money. Therefore, a successful crowdfunding campaign means you get the necessary capital to build your product or service and you still maintain full control of your company. These factors make crowdfunding a great option for products or services that serve end consumers. 

What opportunities work best for crowdfunding?

Crowdfunding is most viable for B2C companies because of the fact that you need a large consumer base to be able to pledge money to your project. B2B companies usually have limited success using crowdfunding because there is not a large consumer base to get backers from. However, there have still been some B2B crowdfunding success stories such as Bitvore. Some of the best crowdfunding campaigns of recent history have included 3D printers, vaporizing pens, short movies/documentaries, smart devices, electronic gadgets, and other consumer goods. 

How crowdfunding can help you land future funding

Crowdfunding platforms are one of the best arenas for startups to prove their concept. When you’re able to induce 10,000+ backers to pledge hard-earned cash to your product or service, this is a great sign for the viability of your company. Angel investors and venture capitalists love to see a successful crowdfunding campaign because it means that there is a real need or desire for your offering. Most successful crowdfunding campaigns will not have a hard time raising further venture capital if they’re willing to exchange equity for it. 

How to spread the word about your crowdfunding opportunity

There are a million ways to get the word out about your crowdfunding opportunity. The most successful strategies involve some sort of social virality. Ideally, you have an initial niche base of people that you can market your project to who, in turn, will share it with their friends (who may not be immediately involved in that industry). If you want more in-depth knowledge on how to spread the word about your crowdfunding project, take a look around online as many comprehensive guides have been written. 

List of crowdfunding companies in India:

Financing After Crowdfunding

If you’ve run a successful crowdfunding campaign and are looking for further capital to expand your business, the Tandon Group can help. We’ve invested in dozens of startups in the technology, wireless, consumer, defense, and IT industries. We’ve had successful exits and are always looking for the next promising startup. If you believe that your company is going to be the next household name, reach out to us. We’d love to be your partner for the road ahead.

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How Startups Can Generate Low Cost Leads

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How Startups Can Generate Low Cost Leads

  May 1, 2015

It’s the age old problem of business: How can my company or startup generate leads to bring in new clients without breaking the bank? If you’re a startup founder, or a marketing manager, we’re positive you’ve asked this question many times, and we’re sure you have the same problem many other startup founders have also. You’re on a shoestring budget, and running a major advertising campaign won’t work for you. Luckily, companies have solved this problem before, and if you follow these three tips below you’ll have a starting point for your lead generation machine.

1. Build a Social Media & Blog Presence

Having a solid social media presence from Facebook fans to Twitter followers is a great way to generate leads. There are a couple ways to build your online sphere of influence. First, start doing massive amounts of keyword research which follows the search queries your customers ask, and create a list of the top 30-40 searches you can find. You’ll need this because one way to build trust with potential customers is by creating a blog where you answer these questions with in-depth analysis. Doing this will leverage your company as the authority figures in the space.

Second, create infographics which visually explain the search queries you researched, which is also a great idea for generating B2B leads. The brain processes visual content 60,000 times faster than text, and in a fast paced world this means quicker understanding by your audience.

Third, set up Google Alerts, which notifes you anytime a person online is asking questions related to your startups field of expertise. You can then go and manually answer questions with a comment or post. This is a hidden growth hacker tactic which will improve your website’s SEO presence with the amount of backlinks you build over time. In addition to this, answer questions on Quora. You’ll not believe the amazing response you’ll receive by providing well thought out answers to a person’s problem.

2. Retarget, Retarget, Retarget

If you don’t know what this is then you need to learn about it right now. It’s slowly becoming the most effective advertising method on the internet to generate leads. Retargeting works by keeping track of people who visit your site and displaying your retargeting ads to them as they visit other sites online. It converts window-shoppers into buyers. Generally, 2% of shoppers convert on the first visit to an online store. Retargeting brings back the other 98%.

Here’s a quick way to make the most of your retargeted ads. First, segment your website visitors by preference. Next, create customized ads for each group of people. Finally, and most importantly, put the ads up in a positive way which means don’t stalk your website visitors. Only show the ad up to 12 times in a 30 day period. People can get intimidated if you immediately follow them around constantly blasting them with advertisements for something they just viewed.

3. Partner with Affiliates & Joint Venture Partners

Affiliate marketing, sometimes known as performance marketing, can be one of the most effective tools for promotion on the internet. An affiliate program lets you use a talented and savvy sales force that’s only paid when they sell a product. You decide how much the commissions will be for those sales, and your company only pays out when you get paid. This does mean you’ll not receive the full profit on your sales because you’ll need to deduct the commision from your payout, but it also means you’re not spending any money on advertising because there are other smart people willing to promote your startup!

Working in tandem with another entrepreneur is another strategy which can be used to leverage low cost leads. A joint venture (JV) is when two firms/people unite to achieve a marketplace goal that neither could achieve alone. This works best when you partner with a company/person in a similar but non-competitive marketplace. Your JV partner would ideally be targeting or have customers who are identical to the ones you’re looking to market to. It’s a low cost strategy which will quickly boost both of your reputations.

To learn more about our company, please contact us

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Is the Indian Tech Bubble Going to Burst?

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Is the Indian Tech Bubble Going to Burst?

  April 1, 2015

It’s been almost 20 years since the infamous “tech bubble crash” of Silicon Valley. In the late 1990s, companies were raising hundreds of millions of dollars before ever turning a profit and it seemed that every week a new tech stock was going public. In those periods of hyper-growth, when the capital was easy to acquire, the only focus seemed to be acquiring new users. Founders forgot that at some point they had to turn those users into revenue.

In recent years, as more and more Indian consumers adopt mobile technology, (and gain access to the internet) Indian entrepreneurship has seen exponential growth. With near-zero interest rates in the United States, a heavy inflow of available capital has been seen in the Indian startup scene. Some economist thinks that this is a sign that India is undergoing the same sort of tech bubble the United States went through in the early 2000s. In this post, we’ll discuss whether or not India is in a bubble situation.

Why do bubbles happen?

In simple terms, “bubbles” happen because overvalued startups focus on growth over revenue. The market eventually catches up, realizes that these companies are vastly overvalued, and stock market corrections force the value of these companies to plummet.

One major difference between the United States tech bubble of the early 2000s and the current Indian startup ecosystem is that many of the American tech companies were in the public sector while the majority of the Indian startups are private companies. This makes it harder for markets to accurately gauge the value of a company because there are no regulatory requirements to publish company financial information. That being said, we can still look at private companies, compare them to the market they serve and see very troubling signs of overvaluation.

Signs of a bubble in India

One example of a potential overvalued startup is Flipkart. Flipkart is similar to Amazon and Snapdeal in the fact that it is an e-commerce platform. As of last year, Flipkart had approximately 45% market share of the e-commerce industry in India. The overall value of the entire e-commerce industry in India is approximately $15 billion. Flipkart was recently valued at $15 billion dollars. You can see the obvious problem here. Flipkart only holds a 45% market share but is valued at the same amount as the entire e-commerce industry. How is this possible? Companies like this are either overvalued or convincing investors of future value they have yet to realize. The valuation estimates could simply be wrong as well.

Fear of Missing Out

Another contributing factor to the potential overvalued startup landscape in India is something that all humans face, the fear of missing out (FOMO). FOMO is inherent in almost all human beings. We don’t want to watch someone else do something fun, exciting, and amazing, and not participate in it ourselves. The startup frenzy in the United States from the mid-1990s until now has shown the rest of the world the power behind technology and the way it will affect the entire world in the coming decades.

While the United States got to experience the internet in its dial-up form, where a telephone landline was required, much of the developing world completely skipped landlines. With the emergence of strong mobile technology, consumers in all areas of the world can now have access to the Internet without the expensive infrastructure that was needed 20 years ago. This transition is manifesting itself everywhere, especially in the fact that India will see more people come online in the next 10 to 15 years than any other country. As we said before, most of this growth is not coming from urban areas but in rural areas, where the infrastructure simply did not exist before.

Public Consensus

In a Youth Survey by HT and MaRS, 20.8% of men and 21.2% of women say Indian startups are in a bubble that’s going to burst. While this isn’t a majority, that still means that one out of 5 Indian consumers believe that large tech company valuations will soon be declining. Let’s take a look at what start-up company executives think themselves Nearly 65% of startup executives and founders believe that Indian startups are in a technology bubble and 18% of them feel that the bubble is close to bursting. [1]

Fund Raising

Last year, 94% of startups looked to raise outside funding. What does this mean for the future of startups in India? Well, for starters, this means that company founders look at internal organic growth as a non-viable option for building their company. While angel investors and venture capitalists can certainly expedite the growth of a startup, companies like Zoho prove that building successful companies does not require outside investment. [2]

Taking on outside investments often means spending money on things that don’t really matter. While it can be nice to have company t-shirts, branded merchandise, fancy offices, free lunch, free events, and all other sorts of company perks, none of these things actually makes your product or service any better.


A tech bubble bursting in India isn’t going to send shock waves through the economy worldwide, like that of the US in the early 2000s. Many companies made it through the crash and are now global superpowers that lead to technological innovation. At the Tandon Group, we believe the same thing will happen in India. Companies that are not truly worth what investors are paying will eventually come to realize their true value while great companies will grow and prosper regardless.

At the Tandon Group we’ve invested in dozens of startups we think are poised to meet with success in the coming years. That being said, we are always on the lookout for the next great, innovative company. If you think that your startup can be the next great success, reach out to us. We’d love to be your partner for the road ahead.

Tandon GroupIs the Indian Tech Bubble Going to Burst?

eComparison: US vs. Indian Startup Ecosystem

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eComparison: US vs. Indian Startup Ecosystem

  March 1, 2015

The Indian startup ecosystem has grown into the third-largest startup landscape in the world. While the US is still the startup capital of the world, the Indian market has experienced many parallels with its American counterpart. The numbers we’ll discuss in this comparison post will be between 2015 and 2016. These numbers usually increase each year so we expect them to increase this year and next year as well.

Below, we’ll lay out some facts and figures that compare the United States and India to see where they’re alike and where they differ:

Population: India and the United States represent the second and third most populous countries on Earth. Trailing behind China, India and the US rank second and third respectively. India has a population of 1.19 billion and the United States is a distant third with 311.1 million people. This means that India has approximately 4x as many people as the United States. This will be an interesting fact to keep in mind as we get into the comparison of startups between the two countries.

Number of startups: As of 2015, the United States had approximately 10 times as many startups as India. The US came in at approximately 47,500 startups while India came in around 4,300. Based on population sizes, that means for every one Indian startup there were 300,698 people. In the US, for every startup, there are approximately 6,758 people.

Number of investors: The two types of investors we’ll look at are Angel Investors and Venture capitalists. The number of Angel Investors in India was only approximately 300 while the number of Angel Investors in the United States was over 300,000. The number of  Venture capitalists in India was ~156 with total VC funding of approximately $6.5 billion. In the US, there over 1,300 venture capitalists with over $47.3 billion invested.

Incubators, accelerators, and coworking spaces: India is also 3rd overall in the number of startup incubators and accelerators, after China and the US. As of last year, India had 140 incubators and accelerators putting it just past Israel. This still leaves India a distant third behind China and the US. The United States has approximately 1,500 incubators and accelerators.

Unicorns: A “unicorn” is a startup with a valuation of 1 billion dollars or more. This valuation either comes from relative value compared to prior investments (post-money valuation) or market capitalization (public market stock value). India had only 10 unicorn companies (though nearly one-sixth of the world population lives in India) – the US had 98 unicorns (with 4x fewer people).

Government Regulation: India’s rank in the World Bank’s Ease of Doing Business Index 2017 is 130, out of 189 countries. A look into specifics paints a grim picture: India ranks 155 in the ease of starting a business, with an average of 14 procedures in Mumbai, when the average is 4.8. The US’ performance is better, with a rank of 51, and an average of 6 procedures to start a business.

Taxes: Marginal corporate tax rates for India and the United States are 38.6% and 38.9%, respectively. The United States ranks third in the world for the highest marginal tax rate trailing only United Arab Emirates (55%) and Puerto Rico (39%). India ranks 12th in the world and 2nd in Asia, after the United Arab Emirates.

If you’re a startup in the United States or India and you’re looking to find a venture capitalist partner, the Tandon group is interested in helping. At the Tandon Group, we have over 40 years of experience investing in technology startups and growing them into multimillion-dollar enterprises. If you’d like to set up a potential investment meeting, reach out to us on our website. We look forward to being your partner for the road ahead.

Tandon GroupeComparison: US vs. Indian Startup Ecosystem