Hey, start up, when are you actually starting up?

Meeting people in start up ventures can be very liberating and confusing at the same time. Liberating, because you suddenly realise that it doesn’t take a Tata or an Ambani to start a business and confusing because many of the people behind start ups have not given a thought to how the last mile connectivity (customer connect) will actually happen.

Now take the example of a typical product launch in the conventional sense. The company works on the new offering, test markets in select pockets; further fine tunes the product and launches it with a big bang media spend. Even the most successful E-commerce companies spend huge amounts on traditional media to make their presence felt and continuously improvise to attract customer attention and retention.

Today, start ups are literally dime a dozen – there are 300 start ups in the travel/hospitality sector alone – while 10 to 15 are known because they have the budget to spend on media the rest are completely unknown. How many hidden gems are lurking among these unknown start-ups? Are they ever going to see the light of day or will they be declared collateral damage by future historians?

The problem has no easy solutions. The problem starts with some start ups allocating customer acquisition expenditure which fits their meagre budget but completely out of sync with ground reality of branding & media costs. For example allotting Rs.25 for acquiring each customer on board technically means that for a princely sum of Rs 25,000 they can get 1000 customers to download their App and keep using it for a long time to come. This is clearly impossible.

They may also argue that the App is free so the customer in essence is getting something for free. Sorry, it still doesn’t make sense because all other Apps are also free and unless the App or idea is placed in consumer context and supported by a strong marketing and consumer reach program (which is expensive), the start up will not really start up.

The only solution seems to be is to come up with a reasonable consumer acquisition budget keeping in mind branding and media costs today when the start up is being funded – this will help to quickly decide whether the start up is worth starting up at all.

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