Building Disruptive Businesses:: The Art of Audacity

Vivek Saxena, Co-Founder & CEO, Digicita Venture Studio Show Me the Unicorn
"We don't have an environment where some body says, 'you have a great idea and so you need to be supported.' We have instead an attitude of 'we don't need to have this, we can do well with what we have", Ratan Tata recently rued when speaking of the woeful lack of really disruptive startups in India as overseas. This set the Indian start-up world abuzz. Opinions bandied around ranged from successes of our very own unicorns, viewed more from the filter of large valuations and funding rather than their originality and impact - to other points of view that nodded in agreement with RNT that most Indian start-ups were really just geoclones of successful global companies. Irrespective of which camp you may agree with, RNT's observation raises the very important question of: Are the Indian unicorns truly disruptive?

True Disruption
So, what definitively makes a start-up stand out as truly disruptive? In my view, it should pass muster through these filters:
1. True originality of the idea or business model-not just incremental
2. Global scalability and appeal
3. Impact in terms of how it affects the way humankind lives!

In short, disruption really occurs when we chase original, audacious ideas and goals. Think Uber. Amazon. Airbnb. The three have redefined transportation, commerce and the sharing economy. However, when we speak of the Indian ‘unicorns’, they seem to fail when these filters are applied. Flipkart, Ola and Paytm have achieved phenomenal scale and impacted the way we buy, travel or pay. But, they were certainly not the first nor original in their business model. Their achievement is primarily market viability in the Indian context. That is not to downplay the phenomenal achievement of these so called geoclones an unfortunate reductionist term, in my opinion, as anyone who has built businesses would tell you about the challenges involved, never mind if a playbook were created elsewhere. And one could certainly argue that the local tweaks and 'jugaad' in these geo-clones are sometimes more innovative than the original innovation! For example, Flipkart and Ola’s local success was primarily due to their ability to make transactions in cash, a far cry from the 100 percent digital global original. Paytm became synonymous with cashbacks - a model which successfully managed to draw investors and then proceeded to achieve market dominance, despite all those naysayers and doomsday predictions! These examples adequately demonstrate India’s capability. There is no dearth of smart, capable talent in
India, to both execute and innovate. Funding is in abundance as well, at least for the start-ups that have achieved a certain amount of scale. So the question then comes full circle - where is the Indian Uber, Amazon and Airbnb?

Early stage funding is available to primarily address market scale risks rather than the design risk, which a truly disruptive start-up needs to take on

Show Me the Money…
At the start, the entrepreneur usually just has an idea. Not much else! The next phase is that of pulling together a co-founders team with complementary abilities to realise the vision, starting to work on a prototype or a MVP and finally finding the funds to fuel it beyond. Walk in reality check! Initial meetings with most potential venture capitalists often conclude with, “Very interesting indeed. We’d like to stay in touch with you as you progress, keep us posted!” Decoded: Too early, too premature for us. While angels and angel forums seem to be more receptive to early stage companies, in reality they rarely have a great appetite for risk. This motley group, usually comprising of HNIs, high profile professionals, capital market investors and entrepreneurs, are mostly interested in knowing where in the west the idea has already been successfully implemented! Discussions on pitch day, more often than not, devolve into a number-crunching massacre.

The bewildered entrepreneur is now facing questions about cash flow, year five projections, insufficient evidence of viability by way of market data, questions about detailed fund deployment plans and more. By all means these are important metrics. However, it would be premature to go by these at a stage in which the entrepreneur is yet to find his rightful place in the world by way of the product-market fit, validation of customer behaviour through insights and so on. Thus, the unforgiving natural selection process of early stage funding leads to riskfree, P&L companies or geoclones (or even worse, clones of geoclones!) getting funded in India while the audacious ones that require a greater appetite for risk, die a natural death. In short, early stage funding is available to primarily address market scale risks rather than the design risk, which a truly disruptive start-up needs to take on.

So, how does one find a truly disruptive Indian start-up?
Unfortunately, there are no silver bullets. Till such time the angel ecosystem matures to develop a larger appetite for risk, driven perhaps by tech founder exists and resultant wealth creation, various models are emerging to address this gap. Technology incubators are one such. The gold standard for these incubators is the Y Combinator. While the YC has seen enormous success, we are yet to see an Airbnb or Dropbox emerge from vast growing number of incubators in India. At least, so far! One possible limiting factor for the tech incubator model is that most entrepreneurs are first timers. They are working their way through product ideas, design issues, market pilots, pivots and need far more mentoring than what an incubator batch of a few weeks provides.

Venture Studio?
Digicita, a venture studio was born out of these insights. The Indian start-up ecosystem's missing link is a platform that brings together:
a) An experienced team of entrepreneurs and innovators,
b) With its own captive capital, not having to 'sell' to angels at the design stage and,
c) Focused on ideas that are truly audacious: innovative, have global appeal and will make a huge social impact.

The idea of a venture studio is to be just that!

Idealab of California has been 'intracubating' companies for two decades, with over 150 companies and a few unicorns. In India, Digicit a with its 'venture studio' approach, along with a few others such as Prototyze and Antfarm, have their own unique versions of that core template. As these models take root, it seems to be only a matter of time for the true Indian audacious innovation of global proportions to emerge!