It\u2019s a Sunday morning and I am skimming through InShorts to get a quick overview of what is happening elsewhere. Amongst the 60 odd unread stories, I am not surprised to read of two startup shutdowns. Then, later in the day, I hear of another startup shutting operations. This one happened to employ a close friend (obviously he lost his job).\r\n\r\nThere exists a serious problem here that nobody is talking about and that is the unique nature of the Indian market which itself is an opportunity to innovate and thrive. Recent graduates from top notch schools in India believe they can clone businesses from other countries and that they will prove to be profitable in their entirety in India as well. Venture capitalists blinded by the founders\u2019 alma mater have been following a hackneyed strategy to provide funding to entrepreneurs who are attempting to clone an idea or business model from USA or China. Their strategy goes something like this for early stage funding:\r\n\r\n \t1\u20132 founders from IIT\/IIM fitting the criteria receive 1\u20132 million dollars.\r\n \t3\u20135 founders from IIT\/IIM fitting the criteria receive 3\u20135 million dollars.\r\n \t7+ founders from IIT\/IIM fitting the criteria and you\u2019re in for a lottery.\r\n\r\nInvestors overlook the fact that Chinese entrepreneurs can afford to clone because their economy is closed, thus providing little or no competition. European entrepreneurs too can effectively clone, because the European pattern of consumption is similar to that of US(and the Rocket brothers are exceptional at their job).\r\n\r\nHaving failed to realize this, entrepreneurs, are squandering their funds on businesses that are completely unviable in the Indian market. It is impossible to imagine how you can fail so fast with so much money. The more people I talk to, the more apparent the problem becomes. This parochial approach to starting a business is what is causing investors to tighten their purse strings and this is going to hit the diligent entrepreneur hard. Given the current uneasiness in the market, this slump in investment is likely to continue for at least a year.\r\n\r\nFrom my various conversations with entrepreneurs, investors and employees of startups, I have gleaned the following three fundamental issues contributing to the downturn.\r\nHigh Customer Acquisition Costs (CAC)\r\nThere are startups (not taking names) spending close to 5000 bucks for customer acquisition. This is what FMCGs spend years into existence. The age old strategy of door to door marketing which the founder has to do is forgotten. As a result, founders are unable to reduce the CAC and end up spending an obscene amount on acquiring one customer who might only sign up without spending much time on the website or make just one transaction. Apart from the 5K spent on luring the customer to the site to conduct a single transaction the company ends up discounting the price of the service or the product to show higher Gross Merchandise Value (GMV). This in turn adds to the cost.\r\nMedia attention\r\nAnother issue I find in the startup ecosystem is the media attention startups and founders seek. Some founders forget that PR is a means to an end and NOT THE END itself.\r\n\r\nPublicity is only a tool to be used to get the word out. An article in the paper does not amount to increased revenue. It is thus important for founders to be involved in the day to day functions and probably work more than any other employee at least for couple of years instead of focusing on media presence.\r\nSlacking and expensive employees\r\nOften as a startup begins to receive increased funding, the founders become lax and this results in slacking. Sometimes funds are mismanaged and disbursed as salary hikes or used to recruit expensive talent that may not really be required. Large amounts of money is also spent on food travel and entertainment for the employees. For God\u2019s sake it\u2019s still a STARTUP. What\u2019s more important is to realise that a business takes 4\u20137 years to build and even then, money needs to be spent wisely.\r\n\r\nOff the top of my head, here is a list of startups who have raised unnatural amounts as funding and have failed or are close to doing so:\r\n\r\n \tPeppertap (IIM founders)\r\n \tGrofers (IIT founders)\r\n \tHousing (IIT founders)\r\n \tPurple Squirrel (IIT founders)\r\n \tTinyowl (IIT founders)\r\n \tFoodpanda (IIM founders)\r\n \tFabfurnish (IIT founders)\r\n \tAmber wellness (IIT founders)\r\n\r\nThis shows one thing and that is, given the poor education system in India with no practical application of what you learn, the university tag doesn\u2019t really matter.\u00a0What matters are the soft skills, the ability to put pieces together and the hunger to learn.\r\n\r\nMost people in this game are hoping to become wildly successful instantaneously without having to put in the hard work. Some entrepreneurs readily accept invitations to talk in events (not a problem if there is a business strategy linked to it) where they harp on about how they faced hardship in raising funds and the difficult time they encountered. If I was an investor, I would never invest in a founder who calls this a difficult time. It is an adventure, a story you are carving and this has to be enjoyed to the fullest. Entrepreneurship is not for the weak minded.\r\n\r\nMaybe the time has come to look beyond the IITs and IIMs to find real entrepreneurs who can sense the pulse of the Indian market. The time for a new generation of entrepreneurs who can cause a metamorphosis in the startup ecosystem in India. The time for a revolution.\r\n\r\nCheck out my take on\u00a0high unemployment in Kerala.\r\n\r\nDisclaimer: The opinions mentioned above are mine and mine alone. Would appreciate if you can critically evaluate this piece. Drop in a line firstname.lastname@example.org.\r\n\r\nCredits for Edits: Paulomi Mehta\r\n\r\nFirst published on Medium by KG.