Speaking at the Venture Intelligence APEX PE-VC Summit in March 2016 - at a time when belt tightening among start-ups was the need of the hour - Avinash Luthria, Principal, responsAbility, advised tech entrepreneurs to mimic the frugal practices adopted by traditional Indian business communities like the Banias and the Marwaris.
Now, Anand Lunia, Founder of seed fund India Quotient, has made a blog post on the specific ills that seem to be preventing Indian start-ups from walking the talk on frugality. Extracts:
Interestingly, Revenue per employee and capital efficiency have been identified by practically everyone as a big systemic problem in India.
...Uber did not offer a call center in India. Ola did, and consumers continue to call the helpdesk for every 30 seconds delay in their pick up.
...Founders hire as per projections. For the first two board meetings, investors also focus on ‘team building’. Unable to meet the stretched targets presented to the board while raising money, the founder tries to compensate by meeting all hiring targets and sometimes even exceeding them, all in good faith.
...Pushed by the board, young founders have only one goal in mind- hack your way into the next round of growth. So unlike traditional companies where focus is on efficiency and long term profits, founders don’t get a chance to think of processes and organization design for the next 3/5 years.
...A fintech co that does far less revenue per employee than regular banks do is not really disrupting anything.
..There is a churn in VCs and new blood is joining. The focus has been only on growth metrics so far and proving the market has been a priority. It will be good to see some new, more comprehensive ways of analyzing and managing companies. Founders need to think long term, beyond the metrics that get measured for funding.
