India is the third-largest startup ecosystem of the world, is being applauded globally for its young entrepreneurs, and is seen as the hub of innovation. One of the reasons is that the country has been a pioneer in disrupting existing solutions and coming up with new ones for problems that exist nowhere else but India.
According to Inc42’s The State of Indian Startup Ecosystem 2018 report, India has more than 39K active startups which have pulled in $38.5 Bn in funding.
However, another fact is that 90% of India’s startups fail within the first five years. This is said to be because of the lack of pioneering innovation.Order The Report Now!
So why is it that many of these innovative and scalable ideas don’t get to see the light at the end of the tunnel? One of the reasons we learnt from startups which shut down last year and we analysed in our series 2018 in Review was the failure to manage the finances and therefore to raise funds and survive.
Financial discipline is crucial for a startup and so is to experiment with growth opportunities and investing in the right ones.
In the first edition of the Startup 101 series in 2019, we are here to help entrepreneurs understand how to budget for their startup’s growth. This week, Ravi Narayan, managing director and cofounder of Mentor Partners, and a startup mentor and adviser, guides us on how to budget for growth and take the right financial decisions.
Narayan, with his years of experience in the startup ecosystem, believes that for organic growth, it is very important to maintain a steady flow of financial resources. To ensure that, financial discipline is paramount, which only comes from a set process, drawing up the right budget, and following it through.
He explains that if a startup is experimenting in 10 areas but only four of them look worth the growth, an entrepreneur should consider putting more money into the more promising projects. “These are the projects you should be doubling down on, be putting money into. Therefore, these are the experiments you want to continue and grow them as really big parts of the business,” he added.
And for the other areas, there’s no need to invest money. Thereby, he explains that the way you structure your budget is to actually keep experimenting.
He understands the importance of running the business with a tight hand, but for inorganic growth, you have to follow the whole process of experimentation, best results, and doubling down on these results to create growth.