5 Good Reasons to Start a Business

August 25, 2010
By krishna

At Zebu, we work with a number of customers who are still in a startup phase. A great deal of our ex-colleagues have startups of their own, to which we have ringside seats. While we’d have argued that the economic downturn was a good time to start a business, for these startups, like most others, the first couple of years have been a mixed bag.

Days of adrenalin rush are punctuated by depressing troughs of lost opportunities, marketing & engineering missteps, with the occasional remind-me-why-we-are-doing-this days. We’ve had our share of these  — as well as coached clients and friends through such phases. One key insight we garnered from these experiences is the need to understand why people start companies* and to answer for yourself, why you started or are planning to start a business. This piece of self knowledge can help the company and you stay focused and manage the ups and downs of a startup.

  1. Personal pain point – Many small, and the occasional large corporation, get their start from a personal pain point that the founder faced. Recent examples of companies that would fall into this category include Redbus and earlier eBay.  The pain of trying to get info (and tickets) for a intercity bus triggered the founder of Redbus to get rolling.
  2. Passion - In many ways this is opposite of the personal pain point. The passion a person has for a subject or activity drives them to start a business. While they may still find getting a bus ticket difficult, they focused on what they enjoyed or loved and began a business.  Examples of such startups include folks who love hiking (MuddyBoots), doing craft (Etsy), collecting books (LibraryThing), or helping people find their true career (iReboot)
  3. Expertise - Most consulting and high technology product companies fall into this category. While the founders may face many personal paint points (how do you get Indian drivers to drive safely) and may be passionate about any number of subjects (music, books, educating children), they focus on starting businesses that leverages the special expertise they bring.  We are expert analog designers (Cosmic Circuits), technology marketers (<blush> Zebugroup) or search pioneers (Google).
  4. Market Gap – In many ways personal pain, passion or expertise are inside out approaches to starting a business. When an unaddressed need or gap is found in the market, entrepreneurs – even if they have no expertise in the domain – can run in to fill the gap. Badri Seshadri, serial entrepreneur says about his lastest startup “I loved reading and couldn’t find a whole lot of subjects covered in Tamil or other vernacular books – so we started New Horizon Media.” Other example of startups who have come into fill gaps in the marketplace include Amagi (local advertising on Indian TV) and YCombinator (2.0 entrepeneurs need a whole lot less money but need a fast leg up)
  5. Diversification - This, while mostly applicable to companies or businesses already underway, is particularly true for proprietor-owned businesses we see in India. If done too early in a startup’s life it can be distracting if not downright disastrous. Apple entering the phone business (and dropping computer from its name), or Flipkart starting to sell DVDs and cell phones are a couple of recent examples of diversification. It can be a way for startups with multiple founders to find their own interests (spin offs) or explore new businesses while not burning bridges on their present business.

As consultants, we find ourselves advising others (and at times ourselves) to follow the money – which might lead one to believe doing a startup to address a market gap is the best strategy. However rarely are things that clear. Entrepreneurs by their very nature perceive gaps well before customers are prepared to acknowledge them. And being early to market can be one of the most frustrating, and potentially bankrupting experiences.

Ideally one or more of the internally focused items – personal pain, passion or expertise overlaps with a market gap so that both the external opportunity and internal motivation sustain your journey to success. So it’s worth asking yourself every so often, “Why am I in business?

*Much of the credit for these 5 reasons has to go to my colleague Bikash Chowdhury who first formulated them.

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