Entrepreneurship Essentials
Prof. Manoj Kumar Mondal
Rajendra Mishra School of Engineering Entrepreneurship
IIT Kharagpur
Topic: How to Start a Startup
Lecture #: 11
Concepts Covered:
To start or not to start!
What is most important factor for success?
What, when, and how to start?
Steps to start a business.
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The What, When and How?
• To start or not to start! Should you start a start-up?
• What are motivations to start a start-up?
• When is the right age to start a start-up?
• What business to start?
To start or not to start
• Successful entrepreneurs advise that a compelling reason to start a
start-up is when someone comes up with new idea that can
potentially do a lot of good to a segment of people.
• Founders creating new venture with the main motive to make
money find it hard to sustain losses.
– Sam Altman – CEO, Y-Combinator
Watch Shark Tank videos
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Should you start a start-up?
Sam Altman, CEO of Y-Combinator says:
You can earn more by joining a start-up and can avoid the risk associated with new
venture. You should think of creating an entrepreneurial venture only if you get an idea,
execution of which would improve the quality of life of a significant group of people and
no one else is capable of doing it.
A Real Valuation Employee # Your First Theoretical Founders’
Company Say 100s Company Valuation upside
Uber for pet $100M $10M
Dropbox 10B $10M sitting
Uber for $2B $200M
Facebook 200B $200M
space travel
We do not subscribe to this philosophy of Sam. But one must make
comprehensive plan carefully. Understand the effectuation model. 5
Real Motivation
• The facts about majority of successful entrepreneurs are that they
pivoted several times before finding successful models.
• Experts also say that if one can identify an attractive business model
with competitive and sustainable value proposition and are
passionate to execute the same, s/he should create a new venture.
• However, novelty should preferably rest in the benefit or wellbeing
of the target customers and not on the amount of money to be
made.
• This course espouses the above policy of starting a venture.
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Real Motivation
• Very few people have started businesses for the reason that they hit
upon idea, which would change the world.
• In fact, a lot of great businesses have been created through
marketing others' products and services.
• Data on motivation to start a business is skewed towards the sense
of independence (Dawson & Henley 2012).
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Our Reasoning … cont’d
How to Start a Startup?
1. Our stand: potential founders should know their strengths,
weaknesses, opportunities, and threats and prepare to take on
the challenges traditionally associated with startups.
2. Constantly explore and investigate for new opportunities of
synergies with their unique skills.
3. They should bounce their ideas off friends, people with some
knowledge about the product or service, and some real customers
(people with the pain that it aims to solve).
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4. Wait till the idea attains some traction.
5. Pilot with MVP. Move ahead with validated learning. Make sure
customers are ready to pay for what you plan to offer.
6. Validate prototypes repeatedly by different sets of customers.
7. Understand the direct and hidden pains in delivery, return and
troubleshoot and maintain. Prepare to meet them all.
8. Gain good understanding of the Business Process Management.
9. Register the company when broadening the team or raising
early seed fund or applying for incubation or acceleration.
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• The activity that you plan to do as your business must solve
some real problem people face.
• If your passion is connected to solving a compelling social
problem, the entrepreneurial path becomes simpler. Failures
become tolerable.
• Unless your passion is about solving a problem, it would be
difficult to gain traction and achieve growth.
• If the motive is only to make money, breakdown of the venture
comes more frequently. Failure gives great pain.
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Push and Pull model of entrepreneurial
motivation (Dawson & Henley 2012)
• “Push” entrepreneurs are those whose dissatisfaction
with their positions, for reasons unrelated to their
entrepreneurial characteristics, pushes them to start a
venture.
• “Pull” entrepreneurs are those who are lured by their
new venture idea and initiate venture activity because
of the attractiveness of the business idea and its
personal implications.
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Factors to Succeed (Eric Ries 2017)
• Investors make their investment decisions primarily based on the
quality of the team, then the idea, and sound strategy to execute
the idea in a profitable revenue model.
• Most investors seem to believe that a team is likely to change its
idea and strategy along the way as the future unfolds.
• Investors want to see the capability of the team to formulate
suitable new plans as market changes and ensure success of the
business.
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Most Important Factors for Success - Bill Gross
• As Bill Gross says ‘Startup Organization’ is one of the greatest forms
to make the world a better place.
• Bill Gross is a serial entrepreneur of a special kind and a wonderful
personality to emulate.
• He used to sell candies when in high school.
• Sold speakers when in college.
• Started software company when graduated.
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Research by Bill Gross
• For next few decades, he started more than hundred companies.
• Many of them became big successes (unicorn) and many failed.
• He quotes Mike Tyson as saying “everybody has a plan until he gets
punched on the face”.
• Business ideas get tested when customers respond. The ‘customers’
is the reality.
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What Is the Most Important Factor for Startup
Success?
• The idea?
• The team?
• Business model [that defines clear path to generate customer
revenue]?
• Funding?
• Timing – is it early, just right or late?
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Results of the Study by Bill Gross
• Bill Gross set up IdeaLab. Results
• IdealLab promoted more than • Timing
hundred companies. • Team
• Bill studied successful and • Idea (differentiability)
failed companies within
idealab and outside to reveal • Business model (you can
why some succeeded and why almost start without a
some failed? business model)
• Funding (easy to raise funds)
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Results of the Study by Bill Gross
1 • Bill Gross set up IdeaLab. Results
• IdealLab promoted more than • Timing
2 hundred companies. • Team
• Bill studied successful and • Idea (differentiability)
3 failed companies within
• Business model (you can
idealab and outside to reveal
why some succeeded and why almost start without a
4 some failed? business model)
• Funding (easy to raise funds)
5
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Examples
• Airbnb – came during high at recession when people were looking for
some extra money.
• Uber – same.
• Z.com (by Bill Gross): online entertainment company, raised lot of money
and everything was in place. They signed up some of the greatest talents
of Hollywood. But broadband penetration was too low in 1999-2000.
• The company was shut in 2003.
• Just 2 years later, the codec problem was solved by Adobe Flush and
broadband quickly penetrated majority of American household, YouTube
came with the same great idea (with almost no idea about the business
model) but perfectly timed.
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Idea and Time
• Nothing is as powerful as an idea whose time has
come.
• There is one thing stronger than all the armies in
the world, and that is an idea whose time has
come – by Victor Hugo
The Final Takeaways
• Based on discussion and evidences above, we consider that the success
factors are:
1. Timing,
2. Team,
3. Execution,
4. Idea,
5. Business model, and
6. Funding.
• How to know that the time for a technology is now?
• One needs to understand the past and present trend of
technologies and make intelligent forecast on future.
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Opportunity Cost of Not Starting
You Will Not Know until You Take the Plunge
• Decision to become entrepreneur is like learning to ride a bicycle. As
long as you do not start, you will remain afraid of even to try.
• The greatest challenge is to shake off the inertia and to begin.
• You may have great potential to be successful entrepreneur. Unless
you start, you will never know it.
• Great entrepreneurs did not have business background, nor did they
show any sign of entrepreneurial skill before they actually started.
• Calculate the risk, understand the level of commitment, the potential
value and wealth creation prospect, and take a call.
• There is a saying that ‘Expectation drives success’. Pessimists and
procrastinators fail even before they start.
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When is the right time (age) to start?
The answer is “any time”. Entrepreneurs can be as young as 18 and as
old as 60-plus. It basically depends on “when you are ready”.
The initial journey is almost always strenuous. In order to sustain this
phase, it is better to have savings to meet household needs and to
meet some setbacks.
Gaining experience in multiple domains such as finance, marketing,
HR, and technology increases the chances of success.
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Which Business?
• Fundamentally, a business in the knowledge domain of the main
founder(s) have greater possibility of success.
• Many entrepreneurs start with own ideas; but majority pivot as they
move on the learning curve with greater degree of confidence and
market information.
• One gets matured on the learning curve.
• Focus on the problem, adequacy of present solution, market size,
market structure.
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Which Business?
• A good percentage of unsuccessful founders are over-confident
(infatuated) on their ideas and make no market research before
going to market.
• Rational assessment of the potential of the business is extremely
essential: [market size, growth potential, competitive advantage
competitors, sustainability of growth, threat from different corners].
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Which business?
• The Problem (the pain): The better you understand the
problem, the closer your solutions will be to customers’ need.
• The solution – efficacy, cost competitiveness, and conveniences.
• The Disruptor Quotient: This constitutes the USP, or unique
selling proposition of your business.
• The timing: ask why now? Is there a compelling
answer?
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Which Business?
• Scalability – the growth strategies and the prospect. Scalability is
about increasing turnover at reduced cost.
• The team – entrepreneur’s journey is full of uncertainties and
lone founder may find it highly depressing and lonely. A balance
team always accelerate the process of venture creation and achieve
success.
• The market structure – past growth and future growth
potential, competition landscape.
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Which Business?
• Entry barrier – will the market get crowded too soon?
• Pricing power – shall you be able to pass on the increase in
input costs to customers?
• Repeatability – will the customer come repeatedly so that you
can earn commendable life-time value?
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Some Steps on Your Journey
Step 1: Know what you care about! Ask: would I continue doing it
even if I don't get any money for it? And if the answer is yes, move
forward with it.
Step 2: Focus on the Problem to be solved, instead of the solution!
Try to know: how compelling is the problem? Does the problem
demand a “must have” solution, "need to have" or "nice to have"
or just a "want to have“ or “ok to have”. If the answer is “must
have”, chances are you may have a monopoly market and can
make above-normal profit. Move forward with it.
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Some Steps on Your Journey
Step 3: List down all potential ideas coming across your head. Every
idea is important till not proven otherwise.
1. How passionate are you about this idea?
2. How enthusiastic are you to solve this problem?
3. Does this idea fit to our fundamental strengths: our expertise
(qualification & experience or technical capability), our resources
(capital outlay, raw-material sources), access to market, capability to
hire people with necessary expertise, our connections. [part of
effectuation process of Saras Sarasvathi].
4. Are we solving a real need?
5. Are there enough potential customers? How frequently they would
buy?
6. Are customers willing to pay for a solution and can they afford?
7. Will our solution be superior to that of competitor’s?
8. How big (scalable) can this idea be?
9. What is the growth potential? How fast the market is growing and
shall grow moving forward?
10. How fast technology is changing and will render our product
obsolete? Can we keep ahead with our own efforts?
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Steps to Start a Start-up
Identify, in a
Empathise with Follow the build,
group of people
Form a balanced the target group to measure, learn
or businesses,
team of define the process of lean start-
some unmet
cofounders with problem and up to prototype and
pain or
complementary ideate potential prepare action plan to
suboptimal
skills and shared solution that go-to-market. Have Prototype
solution, to
vision. Gather makes a product- clear understanding
which you see
market data, market fit. Explore of market segment
possibility of a
assess market incubation and and formulate
better solution
size and growth seed fund. Recruit marketing strategies.
and can make
potential. Form key technology Explore acceleration
an attractive
company. experts to fill any program. Connect
value
skill deficit. with angel investors.
proposition.
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Build the Business
Adopt
Build appropriate
infrastructure publicity for Put in place
to meet creating appropriate Continuously
projected awareness logistics that collect
sales. Estimate among meet customers’
cash flow. potential customer feedback and
Remain customers. preference. refine your
connected Focus on Engage with solution to Infrastructure
with investors customer distributors, exceed
for pre- retention, dealers, customers’
emptive fund innovate to mega- aspirations
raising. Engage create and retailers, E- around your
vendors for retain commerce solution.
supply of key growing sites.
inputs. customer
base.
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Growth Strategies
Keep an eye
on Take stock of
Make Product
competitors. the resources.
reasonable development
Try pre- Make
target. initiative
empting assessment of
Identify key should
their need. Invest in
indicators continue.
strategies talent.
affecting the Pre-empt
and actions Continuously competitors
growth of your wherever Launch
analyse with new
business, then possible. customers’ launches.
focus all your React feedback.
resources. immediately Project fund
Address all
Check sales on to their requirement
complains.
daily basis and actions to and arrange
Create a
keep trouble retain fund in
healthy work
shooting. competitive advance.
atmosphere.
advantages.
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Word of caution
• Entrepreneurship is not for faint-hearted. It requires
tenacity, commitment, perseverance, grit and
resilience.
• An idea may look enormously attractive and no apparent / visible
reason for undue competition, but may not eventually translate into
profitable business. Reality will be known by prototyping and
market testing/ customer validation.
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Steps to start a start-up – registering your company
• Formal premises for the business – owned or rented.
Minimum requirements to
• Trade license – issued by Municipal Corporation or Panchayat.
start and run a business
• Goods and services tax registration.
• DIN [director identification number (DIN)] . registering your company
• Obtain digital signature certificate (DSC) for all the directors.
• Reserve the company name.
• Stamp the company documents at the State Treasury (State) or authorized
bank (Private).
• Incorporation
• PAN & TAN, GST number
• ESIC (Employees’ State Insurance Scheme of India) registration - Medical,
disablement, unemployment, maternity, dependent benefits. INC-29 form of
MCA - ebiz.gov.in
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Registering your company
Part 1
• Obtain Digital Signature Certificate from MCA-authorised agency
• Time to Complete: 2 to 5 days
• Cost to Complete: ₹ 1,500
Part 2
• Prepare form INC-29 of MCA
• Time to Complete: 1 to 3 days
• Cost to Complete: ₹ 1000
Part 3
• File INC-29 with the MCA
• Time to Complete: 1 day
• The cost to Complete: ₹ 2000 + authorised capital fee + stamp duty
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Registering a limited liability company
Part 4:
• You receive the incorporation certificate (officially in two days)
• Make a seal (Private)
• Get Permanent Account Number (PAN)
• Obtain a Tax Account Number (TAN) for income taxes deducted at source
• Register with the Office of Inspector, Shops, and Establishment
Act (State/Municipal)
• Obtain GST registration
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• Register for Professional Tax at the Profession Tax Office (State)
• Register with Employees’ Provident Fund Organization (National) –
20 or more employees.
• Register for medical insurance at the regional office of the
Employees’ State Insurance Corporation (National) – ESIC [at least 10
employees]
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Depending on the type of business, one has
to obtain specific licenses: Examples
• Pharmaceutical company (some among many licenses)
• Company Registration
• Drug Licence
• Goods and Service Tax ( GST ) Registration
• Trade Mark registration
• Many more
• Food business operator
• FSSAI - Food Safety and Standards Authority of India (FSSAI) license
• Health Trade License for all eating joints
• Shops and Establishments Registration
• Fire Department NOC
• Environment clearance
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Perseverance: What great people said
1. "I'm convinced that about half of what separates the successful entrepreneurs from the
un-successful ones is pure perseverance."--Steve Jobs
2. "Continuous effort--not strength or intelligence--is the key to unlocking our potential."--
Winston Churchill
3. "Effort only fully releases its reward after a person refuses to quit."--Napoleon Hill
4. "The difference between the impossible and the possible lies in a man's determination."--
Tommy Lasorda
5. "Courage doesn't always roar. Sometimes courage is the quiet voice at the end of the day
saying, 'I will try again tomorrow."--Mary Anne Radmacher
6. "It's hard to beat a person who never gives up."--Babe Ruth
7. "Patience, persistence, and perspiration make an unbeatable combination for success."--
Napoleon Hill (According to Hill, "98%" of people had few or no strong beliefs, which made success unlikely.)
8. "Energy and persistence conquer all things."--Benjamin Franklin
9. Thomas Edison said that his success was a result of one per cent inspiration
and ninety-nine per cent perspiration.
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References:
Dawson, C., & Henley, A. (2012). “Push” versus “pull” entrepreneurship: an ambiguous
distinction?. International Journal of Entrepreneurial Behavior & Research, 18(6), 697-719.
https://www.ted.com/talks/bill_gross_the_single_biggest_reason_why_startups_succeed?language=en
The Startup Way : How Entrepreneurial Management Transforms Culture and Drives Growth – by Eric Ries,
Penguin, 2017
The Four Step to Epiphany – Successful Strategies for Products that Win – Steve G Blank
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Concluding remarks:
1. Must have an inspiring vision.
2. Make comprehensive execution plan.
3. An open, receptive, questioning culture helps to retain your best talents.
4. Empower people at all levels to bring out their best and reduce burden on
you.
5. Make plans, set goals, deadlines and benchmarks for innovation and
performance.
6. Keep pursuing the best ideas and creating products for future launch.
Think Big, Start Small, Scale Fast
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Thank you
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How to start a start-up: Early phase
• Identify pain point
• Explore if you can come up with better product than competitors
• Research market structure (growth prospect)
• Research demand and supply position.
• Empathize You may register your company any
• Define the problem time.
Incubator, accelerators and most
• Ideate solutions investors insist that you register your
• Prototype company before they can induct you in
their programs.
• Test and validate by customers
• Refine
• Ready to go-to-market
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Napoleon Hill – Think and grow rich
Desire: The Starting Point of All Achievement
Faith: Visualization of, and Belief In Attainment of Desire
Autosuggestion: The Medium for Influencing the Subconscious
Mind
Specialized Knowledge: Personal Experiences or Observations
Organized Planning: The Crystallization of Desire Into Action
Decision: The Mastery of Procrastination
Persistence: The Sustained Effort Necessary to Induce Faith
Power of the Master Mind: The Driving Force
The Subconscious Mind: The Connecting Link
The Brain: A Broadcasting and Receiving Station for Thought
The Sixth Sense: The Door to the Temple of Wisdom
How to Outwit the Six Ghosts of Fear: Clearing the Brain for
Riches
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When are you ready to go to market?
• Choose location to set up factory.
• Procure all licenses and permits (trade license, company
registration, goods and services tax registration)
• Apply for electrical connection of required power load.
• Contact and contract suppliers of key inputs
• Write business plan
• Establish connection with investors/banks for funding.
• Design company logo, trademark, brand name of flagship
product(s).
• Establish channel for distribution or online sale.
• Finalize packaging and its design.
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More about how to start …
• Remember, execution is as important as the idea.
• A wonderful idea executed poorly will lead to no where.
• Great execution of an idea around a poor market structure will force
the energy down the drain.
• Innovation supported by IP (intellectual property) offers great entry
barrier and monopoly advantage.
• Understanding the economic significance of the idea is of essence.
• Most people are overzealous about ideas coming out of their own
mind.
• A good percentage of students get overly excited about the new
ideas and are unrealistic on its economic prospect.
• Many regard rational advice as unrealistic criticism.
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