So far, we have explored the role of institutions and influencers from the 6I3C framework of the entrepreneurial ecosystem. In the third article of the series, we shall discuss the role of internal factors of the startups and how they contribute to the start-up’s success. For the earlier articles, please explore the earlier issues of this journal. The following internal factors influence the start-up’s success: entrepreneurs, founding teams, structures, employees, women, and value proposition.

Research has been done to identify the traits of a successful entrepreneur. When consolidated, fifty-two unique characteristics were attributed to entrepreneurial success. While there is a strong belief that entrepreneurs can be trained, the existing training programs have not improved the success rates. However, the researchers, the faculty, and the universities believe that training programs can help entrepreneurial success. In this scenario, the entrepreneurs continue to be the stars and primary reasons behind the venture’s success.

This perception has been changed to some extent by the concept of effectuation by Prof. Saraswati, who proposed the entrepreneurial method and suggested that we can train people to be entrepreneurs by adopting the method. She suggested a fundamental shift from causal thinking, which starts with the end goal and works backward, to entrepreneurial thinking, which begins with the available means to explore where that would lead. This is a significant shift in the approach of a founder that frees us from a fixed mindset. As suggested by Prof. Carol Dweck, one of the reasons for low levels of innovation among managers is this causal thinking.  

While founding teams are the primary focus of most VC firms, society still glorifies individual entrepreneurs. The role of a capable team is yet to be fully understood and appreciated by the founders. Founders recruit their team members based on familiarity rather than competency. This poses a significant issue as the venture would then suffer from the lack of necessary competencies more than a lack of funding. The process of founding team formation needs further study that would help form strong founding teams.

The next significant internal factor is the structure of the startup. Little research exists in this space, possibly because of a lack of formal structure at the pilot stages of a startup. This indicates a significant opportunity to be explored further in terms of formalizing the structure of the startup based on the business model rather than the founding team.

The early-stage recruitment, compensation, and retention continue to pose a threat to startups. Due to a lack of brand image and impending uncertainty, most professionals don’t prefer to work for startups. Finding the right kind of talent which can be deployed right away is a significant issue. Protecting intellectual property is another challenge preventing founders from expanding their teams in the pilot stages. But once the funding happens, scaling up is inevitable, and startups end up paying top dollar for attracting the necessary talent. The role of employees plays a crucial role in the success of the venture. However, setting the right culture based on the firm’s values is a significant issue associated with expanding the workforce. One suggested way forward is to adopt BOT approach where the founding team collaborates with an outsourcing partner to build and run the solution in the initial days that can be transferred later to the startup along with the people who worked on the solution. Another model could be acqui-hiring where a startup acquires another firm that uses similar competencies and skills.

Women as founders have been playing a significant role in the startup ecosystem. Despite the social barriers and stereotypical roles they are expected to play in the family, they have struggled to establish themselves and their firms. Research shows that across the world, the problems and challenges remain the same for women entrepreneurs. This is a concern that needs to be addressed at a global level. These are deep-rooted sociocultural issues that need to be chipped away by identifying and promoting successful role models of women entrepreneurs. The VC firms focusing on impact funding could focus on exclusively funding new ventures launched by women founders.

Finally, the value proposition continues to play a highly significant role in the success of a startup. Many entrepreneurs fail to validate the value proposition during the pilot stages and spend a lot of time developing the product or service they believe is appropriate for the market and target customers. By the time they start collaborating with their customers, it is usually too late as the feedback is devastating and questions the founder’s assumptions.

The cocreation of the solution along with the target customers has been suggested by Lean startup methodology, where a minimum viable product is created and evaluated in an incremental way so that the final product has a better market fit and delivers a better value proposition for the customers. Creating such a process that involves interested and willing customers would be a challenge that needs to be surmounted.

These suggestions would help us address the internal factors that influence the success of a startup.

About the Author

Flt.Lt. Sridhar Chakravarthi is an experienced organizational change coach and consultant with over 30 years of leadership experience in various industries. He believes in the possibility of exponential growth for individuals, start-ups, and mature organizations. He empowers them to achieve exponential growth by bringing agility into their mindset, processes, and behaviours. He is an authorized training partner for Enterprise Agility University, runs his company “Coach for Change” and lives in Bengaluru, India.

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