The past decade has seen India emerge as a strong contender for the startup destination of the world. With exciting deals and data points continuing to grow, the country now has a very thriving startup ecosystem. It is estimated that over 5,000 brave souls venture out to start their own companies each year. With more government backing, availability of venture capital in multiple stages of an entrepreneur’s journey and an abundant, energetic workforce, startups are all set to rise even higher on the success trajectory.
In this backdrop, we are pleased to present to you the inaugural edition of Startup Pulse Survey by Accel — focused exclusively on startup founders and how they feel about different aspects of their business. Over a couple of weeks, more than 230 founders across industries responded to a wide range of questions in this online survey — from funding climate and pivots to gender diversity and their role models.
The results of the survey are a mixed bag, with some findings in tune with expectations and others taking one by surprise. But all in all, the insights gathered here should help entrepreneurs, investors, and others in the ecosystem gauge their relative positions vis-a-vis others and take a broader view of how things are shaping up. The idea, of course, is to help the startup community in the country succeed in the long run.
So, without further ado, let’s see what the ‘pulse’ reveals.
Most respondents either answered that they put “profitability before valuations” (36%) or that the unicorn tag is not really indicative of the value creation for their company (39%). This is not to be interpreted that most founders are not ambitious (one in four respondents is chasing the unicorn tag), but that they are more realistic about their companies and may not necessarily be playing in horizontal, winner-takes-all markets. Importance of the unicorn tag for startups declines with successive funding rounds: for seed funded companies, it’s 38%; for series A, 30%; series B, 27%; and for series C, it’s a mere 15%. Obviously, building business becomes more important than the unicorn status as companies begin to achieve scale.
When most entrepreneurs start out with their idea, the perceived notion is that this is exactly what the market has been waiting for. Well, it turns out that most founders have had to spend a great deal of time figuring out product-market fit. PMF is clearly a patience game: one out of two companies takes more than 12 months to get PMF right.
As many as 50% of the companies that raised money in a series B round have pivoted at some point in their journey — with more than half of these having done so multiple times. This is not something to worry but only taking a leaf out of the playbooks of large companies — who have never shied away from changing their business models or doing other critical course correction to succeed in the long run. The survey only highlights that pivoting is a way of life for startups, and rightly so.
One of the critical things for startup founders is to keep the team morale high — and nothing seems to reflect this than a growing company on track to meet its metrics. For most startup founders, “growth in the business” was clearly the winning factor among the clutch of choices the survey presented when it comes to affecting the team morale positively. So, while 59% chose growth as most motivating, merely 6% picked fundraising (understandable, since it’s the founders’, not team members’ job, to raise money). The second spot — a distant second at 18% — was taken by “problem we are solving”.
On the question of picking a factor that strongly determines their company’s success, most entrepreneurs were somewhat equally divided among three things: tight execution (33%), extraordinary market (29%) and great product (29%).
However, on a deeper look, repeat entrepreneurs value execution 1.5x more than market factors, whereas first-time entrepreneurs place 3x more importance to market factors than execution.
Given that there have been concerns about the poor gender diversity ratio in the Indian startup ecosystem, one might have expected diversity to be on the rise. Not so, unfortunately. According to the majority of Startup Pulse Survey respondents (68%), gender diversity in the team either remained “pretty much the same” or took a nosedive. While only 33% founders perceived a significant increase in diversity, we hope that this tremendously improves.
The world over, women have remarkably and positively impacted how companies operate and touch the society at large — just as organizations of all types and sizes are becoming more and more committed to improving their gender diversity. In this context, Indian startups must do more to include more women on their boards as well as in the workforce.
No, it’s not fundraising that is causing founders to lose sleep. What makes entrepreneurs count sheep are two primary reasons — strategic direction and long-term goals (27%) and sales & marketing/business development (23%). However, within these parameters, the situation is a bit different for Business-to-Business vs Business-to-Consumer. B2B startups worry more about sales whereas B2C folks are more worked up about long-term vision.
The #1 thing on a startup founder’s mind — yes, you got it right — is money. Most entrepreneurs in our survey chose “capital, valuation, equity” as their top criterion when picking a VC. The second preference is for VCs that have been entrepreneurs, while at №3 is the “depth of portfolio in my domain”.
While the mention of AI/ML neither makes people raise their eyebrows nor open their mouths into yawns, most entrepreneurs in our survey do not consider this technology critical for their business — yet. Maybe at some point they will: 23% responded with “may be”, 47% with a “no” and the remaining 30% with a “yes”.
Founders responding to the Startup Pulse Survey have picked out technical/R&D as the toughest function to hire for (31%). This is followed by hiring challenges in sales/marketing (21%), and then product management (19%). Operations and other functions are comparatively less bothersome.
Feel free to download the detailed report here
Many thanks to Advaith Vishwanath, Avinash Raghava, Karan Shah & Prayank Swaroop for reviewing and putting this report together. Once again, our heartfelt gratitude to the entrepreneurs for taking the time and effort to answer the queries and provide their perspectives on what matters and what doesn’t.