Reality of Start-up Companies

KOMPAS/DIDIE SW

.

At this time, becoming a start-up entrepreneur seems to accord special prestige.

A paradigm shift seems to be happening. Not infrequently, new graduates choose to try their luck as start-up entrepreneurs. They reject job offers for civil service positions, even as employees of large and established companies. This was unimaginable before.

The trend is, of course, a result of rapid technological developments. Technology opens many exciting new opportunities, the easier and more personal it becomes for each user.

The courage to dive into entrepreneurship, especially among young people, is worthy of appreciation. However, it is also good to look deeper into the reality that start-up companies face, especially those in Indonesia. By doing so, decisions can be taken based on complete facts and data.

The ‘richest’ list

The recent entry of several young start-up entrepreneurs onto the list of the richest Indonesian people is another motivational factor for young Indonesians. These young entrepreneurs have often achieved their success on amazing innovations.

However, it is important to remember that innovation is not enough in itself. These young entrepreneurs reached success after struggling through formidable challenges and obstacles.

The key to success is a fighting spirit and passion. If we have ideas and concepts for an innovation but lack passion, we will easily give up when faced with difficult challenges and problems.

Having innovative concepts and ideas along with passion is initial capital, but this is far from enough to succeed as a start-up entrepreneur.

Almost all founders of digital and start-up companies who have risen to possess an extraordinary work ethic: They are highly disciplined and hardworking.

One such founder often told me how, at the start of his business, he worked day and night without a break. He could only take a one- to two-hour stroll through Pondok Indah Mall in order to unwind. He did not shop, because he did not have much money in his pockets at the time. This means that to become a start-up entrepreneur, a person must be willing to work day and night and live a life of moderation, possibly even deprivation, especially at the outset.

When the company starts growing, this does not mean that the challenges will diminish. On the contrary, there will also be more challenges as the company grows. Essentially, whether the company is a start-up or not, it still has many aspects that must be tended to, ranging from financial planning to managerial skills, rigorous bookkeeping and tracking expenditures to human resource management, as well as tenacity in facing a variety of legal and licensing issues and in executing business strategies, along with many others.

Needing help

Among those who founded start-ups, many did not have skills in the areas mentioned above. This is one of the reasons why the majority of start-up companies folded.

The founders of the companies that closed may have had innovative concepts and extraordinary passion. However, in their development, the companies failed to raise capital funds or, after obtaining capital, the founders were unable to manage their finances properly. It could also be that the founders had innovative concepts and ideas, but were not successful in managing the companies.

There is only one solution to the above problems: the entrepreneurs must seek help. This seems very easy conceptually, but in practice, it is not that easy.

First, a founder must possess humility to acknowledge his shortcomings in a particular field and that he needs to seek help from others.

Second, how will a founder convince someone talented in a specific field to join him?

Of course, in scouting talent, it is expected to seek out the individual with the best abilities, and not just some random person. However, anyone so highly skilled is very likely to already have a well-established position at a well-established company. Why should such an individual let go of everything to join a start-up company that is unstable and risky? The salary offer may even be much lower than his current salary.

What is the result? Eventually, many start-up entrepreneurs end up recruiting random human resources. A further consequence, of course, is that the company’s productivity crashes to lead to eventual failure.

To be able to gain the best talent, the founder must have a big soul, possess humility and have a strong vision that is meaningful to the targeted candidates.

Other challenges

As the company grows, there will be other challenges. For example, it is very possible that the founder discovers that their talents no longer fit the growing company. The bigger the company grows, the greater and more varied challenges they will face.

At such a moment, the founder faces a difficult challenge. On the one hand, the company needs highly skilled talents; on the other, recruiting new human resources can mean shifting several employees who have been part of the company for the last few years, generally employees who are like family to the founder.

It often becomes very difficult to choose between friends or the company’s future, especially if that requires replacing most of the company\'s managers. Keep in mind that hiring new employees with better skills could even mean doing so at risk of the corporate culture, when that culture is often one of the main reasons that the start-up has been able to successfully wade through the challenges of its beginnings.

Moreover, the founder himself must also face many challenges. One example is that, as the company develops, it is not impossible that the founder may require an audience with high-ranking government officials. As the company continues to grow, it is very possible that the founder will be invited as a forum speaker or to meet with top officials.

Of course, the founder doesn’t have to attend to these individually. However, a founder has a strong emotional bond with the company. A reliable founder can explain the company history and its journey better and more meaningfully than an employee.

For example, it should be the founder who attends a meeting with a minister or even the President, not an employee. The question is, can the founder hone their abilities as necessary as the company develops?

Preparing for crisis

Finally, there is a challenge that start-ups in Indonesia have not had the occasion to face. Many of today’s start-ups were formed after the global financial crisis in 2008. Even though some start-up companies may have been formed before the crisis, they were still relatively small at the time. This means that most or even all well-known start-up companies of today have never experienced a significant crisis.

It must be asked as a separate question whether these companies are ready and have sufficient capacity if a financial or economic crisis hits the world or Indonesia one day.

All the problems described above are not intended at all to dash hopes or to be discouraging. They are intended to illustrate my great admiration for start-up companies, especially those that have made many achievements and have made it as a "unicorn" (a start-up valued at more than US$1 billion).

We all certainly hope that Indonesia will produce more start-up entrepreneurs who give birth to ever more successful start-up companies.

However, it is good to have all information and facts about the challenges the future may hold beforehand, so an appropriate plan can be drawn up. Forget about romanticizing over Silicon Valley or start-up success stories, because the context and challenges you will face may be very different.

Teddy Oetomo, Chief Strategy Officer, PT Bukalapak.com