In defence of 'Startups'

Many people are baffled by the whole hype around ‘start-ups’ and often wonder “is this whole start-up business even sustainable? None of them look like they will ever make profit?”

I can understand their confusion. For them ‘business’ is an entity that should make ‘profit’. Everything else is secondary.

What we need bear in mind, in the context of startups though is that many of them are still ‘ideas’ that need to be fully developed, rigorously tested and validated at scale.

They are ‘ideas’ that are still evolving and taking shape. And some of those ideas are so ‘out there’ that they will require significant investments both in terms of time and resources before we can fully realize the power or futility of them.

So, to look at ‘profit’ as the sole criteria to evaluate them, especially in the short run is slightly myopic. It is almost like evaluating a child’s entire worth by only looking at his “report card”. Won’t you agree that’s a little bit unfair?

When you are evaluating start-ups, the ‘purpose’ (i.e. what the brand is striving to accomplish?) is sometimes the most important measure.

Some of these ideas have fundamentally changed the way we consume or access many categories today. They broke the status quo and transformed many industries forever. In the process they have become a way of life for us.  

Can you imagine your life today without brands like Ola, uber, Amazon, Swiggy, Zomato, Airbnb, etc? At least I can’t. Considering the sheer magnitude of their mission, what they have been able to achieve in a rather short span of time is already incredible

 “But there are so many lame ideas that are also getting the funding?” You would argue

So I want to ask “ how do you tell if an idea is lame or great?”

Some of the greatest startups today might have sounded like lame ideas on a piece of paper when they were beginning. The sheer ambition and complexity of some of those ideas might have made them look ridiculous too (another word for lame).

So the VCs take their chances and fund these (often outlandish) ideas hoping at least some of them will become successful. Even a single successful bet can more than make up for many bad bets. It is a typical high risk- high reward scenario. Like how Tiger Global reaped $3 Billion after investing $1 billion in Flipkart Group (as per the recent reports).

Leave aside the investors for a minute. I believe one of the biggest beneficiaries of some of those crazy ideas is us - the consumers. Yes, you and me. They have added more choice, convenience and savings to our everyday life.

So, next time you read about some startup raising another round of funding, rather than smirking, smile and wish them success. Who knows, tomorrow that same startup might make your life better!

Author: Gurudev Prasad

June 5, 2019