startup fail

in Learnings, Startup

Why our first startup failed

Our first venture was a completely new experience for me. The three other founders had a fair bit of experience in setting up and running a business (13 years, 6 years and 3 years, in descending order) while I was the only fresher around. I guess my childish enthusiasm and general naiveté led them to christen me “Sid the Kid” but thankfully, they were nice enough to stop calling me that after some time.

The business model

The best engineering colleges are the ones with the best placements (stands true for MBA colleges too). Lots of times, a college is initially able to attract a recruiter (Infosys, TCS, Wipro, HCL, Accenture, IBM, etc) but since the students don’t perform in the recruitment process, the company might not take as many people as it was ready to.

That’s where we came in. Our Placement Development Programme (PDP) would integrate in the colleges’ curriculum and faculty members would go to different colleges to deliver the session. The programme consisted of Aptitude (Mathematics and Logical Reasoning), language (English) and soft skills training (group discussion and personal interview). So, if we were working with ABCXYZ Institute of Technology, their class timetable had 2 slots (usually 4 hours) in the week where our company name was written and during that time, a faculty member would come and deliver the session.

The beauty of this model was that none of the faculty members were our full-time employees, they were consultants who went and delivered as and when required. Therefore, we really didn’t need a big office (in fact, it was a one room setup in one of the partner’s office) and most of our work was done through mobile phones and laptops.

The numbers matched up pretty well too. One faculty member on average was paid Rs. 500 per hour. For a 50 hour course, our charges would be about Rs. 2000 per student. If we worked with one large engineering college, they’d have 180 students sitting for placements from three branches of B.E. So revenues would be 180 x 2000 = 360000 minus 50 x 500 x 3 = 75000 (faculty fees) and let’s assume Rs. 75000 as cost of providing transport through taxi for some faculty members and other miscellaneous expenses, we’re left with 360000 – 150000 = Rs. 210000.

As you’ll realize, that’s not a bad amount for basically sending faculty members to colleges. And if you were to think scalability, two faculty members (English & Aptitude) taking a 2 hour session each per day in the same college (total 4 hours) can cover 5 colleges in one week. Even then, they’re working only 2 hours a day each. If they were to go to one of the areas where colleges are clustered in Jaipur (eg. Sitapura or Kukas) and give 3 sessions each, they could cover 3 colleges per day making it a total of 15 colleges per week. Let’s suppose this continues for 12 weeks so after 3 months, our company nets a cool 210000 x 15 = Rs. 31,50,000. Now consider that there isn’t a lack of teachers in Jaipur since it is one of India’s larger educational centres. In the end, you have enough number of teachers to be sent to enough number of colleges and quite a bit of money to be made.

Fair enough, so what went wrong?

Two things:

  1. We were lazy and did not move our butts as much as we should have
  2. We didn’t understand the colleges’ incentives until it was too late – The engineering colleges don’t really care that their students should be smart enough to handle the companies’ recruitment processes. They just care that they get placed. Anywhere, anyhow. Therefore, a college focuses primarily on the number of companies coming to campus and not preparation of the students. So more often than not, the concerned Training & Placement Officer (TPO) said to us “If you’re doing training for placements, why don’t you just go ahead and get these students placed”. They were ok with getting them placed anywhere in any kind of company as long as they were “placed from college”. That is really shady business to get in to.
  3. We got distracted – You get a bunch of smart people together under one roof and go out to the market looking for work, you’ll realize there’s no dearth of it. In such a situation, navigating the trade-off about how quickly can it be done, how easily can it be done, how much does it pay and do I want to continue doing this forever?, is crucial. We sucked at that. We worked with these guys (they just got arrested) developing a marketing management course for them and got one very crucial bit of learning out of the entire project: don’t ever work with MLM companies. However, in spite of the awesome life learning and all that cute bit, we had burnt up the meager amount of startup capital we had while executing their project and basically received fuckall for it.

Therefore, to sum up: Not working hard enough, not understanding your customer, losing focus and consequently running out of cash. As you’ll realize, dear reader, these 4 are deal-breakers big enough to kill any business organisation.

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