In this day and age, most people want to be a entrepreneur. The chances are that if you don’t, then the person sitting next to you does.
A slurry of surveys from the past few years has shown that no matter where you are, more than 50% of the working population harbour desires to be their own boss.
The sad reality is that only one in 10 manage to achieve that dream. Reality is far removed from the silicon valley life that most people imagine.
The struggle really starts when you have your idea, with a failure rate of – depending on who you believe – between 90 and 95 per cent.
A lot of those failures come from a common problem. Choosing the wrong industry to forge your new path in. Simply put, some verticals are a lot harder to break into than others.
So to help any budding entrepreneurs out there, I chatted to a few friends in the Venture Capital and Private Equity space to find out which fields are the toughest nuts to crack.
The likes of Facebook, Twitter, Instagram, Tinder and Whatsapp all broke ground within a golden decade and changed the world.
They also spawned a million and one clones from founders who all wanted to become the next Zuckerberg or Dorsey.
It’s not an exaggeration to say they covered every possible niche known to mankind, it’s also fair to say that 99 per cent of them failed within the first few years.
And there’s the problem. Generally speaking, there’s only one Facebook, one Google, one Tinder and people make their choice and stick to it.
When you think of it, it is one of the most unforgiving sectors you could think of. You need B2C user acquisitions, and you need to attract huge numbers of people to get real interest. Once you get them you must retain them and constantly improve your value proposition, all while competing against enormous behemoth’s and the other 10,000 platforms that are competing for your mindshare.
Then once you get the users, you have to figure out how to scale internationally and finally make money out of them. That’s the big issue even Southeast Asian giants like Carousell are trying to grapple with.
Even the ones who have managed it – like Singapore based dating app Paktor – had to turn it into a science. Studying human behaviour, allying that to sheer hard work and constantly evolving.
Marketplaces were one of the zeitgeists of 2015 and 2016. Investors were willing to plough millions of dollars into ventures in this region (think Lazada, Flipkart, Souq.com) in the hopes of creating market dominance and owning a potential audience of 2 billion people.
The lure was that they were easy to get into, meaning anyone with a bit of funding and a bit of hustling could get into the game.
But the clamour for Asian e-commerce sites has died down a little, as one VC friend told me: “It’s easy to get into but difficult to scale or survive.”
It’s precisely the low barrier to entry that makes it such a hard vertical to succeed in. It’s very hard to build a defensible business when you are not only competing with hugely-funded incumbents, but also a dozen similar SMEs all competing for a relatively small (for now) piece of pie.
Add the fact that “customer loyalty and retention is difficult as Asian consumers are very price sensitive.” To the mix and you’ll quickly see it’s not the easiest way to make money.
Singapore is making a big play to woo R+D based start-ups. A raft of measures, including help with patents and access to lab time and top class facilities, is designed to help make the little red dot a leader in the field.
And there’s a reason they need to offer incentives. This is a grueling vertical to get into.
Not only do you need a high level of expertise just to get into the space, but your projects and products can be hampered by regulatory approvals.
This in turn, leads to long development times and it can take years to go from ideation to commercially viable product.
Of course, this means there might be no revenue for several years. Testing both the patience and the wallets of the founders and their investors.
Whatever you choose to do. It’s a long road, and while the rewards can be great. Failure can be very costly too. Just make sure you do your research and go in with your eyes wide open.
Adam Flinter is managing partner at Golden Equator Consulting, a company which helps start-ups, SMEs and mid-stage businesses with their strategy and growth.