A sad reality of some IT "Startups"

Beginning of the week we, some LUGM executives, attended a meeting where an Open Source Policy for Mauritius was being discussed. Yup! This was in the air around January 2014; seems like the project took off finally.

While meeting & brainstorming the current situation with local groups & efforts from Government side, an interesting topic was evoked. Startups! Do we really make a difference between startups and SMEs in Mauritius? Avinash, who was in LUGM team, provided an awesome insight on the situation with startups in Mauritius.

Avinash is indeed an experienced fellow who has been and still is an educator, a founding member of Linux User Group of Mauritius, thus unveiling his experience & contribution to Open Source and he's been a business person. So, while he was talking I was kind of listening to his words attentively and the words struggle, access to finance, startups, etc sent me in retrospect mode. The mere mention of these words shot bits and pieces of memories in front of me.

When I was 21, ideas abound my mind. One of the ideas was to set up an IT company, which I did. I started with a cybercafé, which I made with a non-traditional approach. During college days, while I didn't have Internet at home, I used to spend a lot of time in cybercafés. I observed a lot of stuffs that could be improved. When I got my chance of doing so in 2006, I shortlisted those observations. The idea was not just to have people coming and surf Internet. I tried a different approach where I actually charged for the PC usage; that doesn't matter if you would use Internet, the DVD writer, install a program & benefit from the graphic card, etc. The idea was good but one hurdle was still there. How to finance the project?

Issue 1: Access to finance

Yes, access to finance is a big issue in Mauritius. This was also highlighted by Avinash in the meeting. He quoted something which again triggered memories in my mind. He said when he approached financial institutions, most of them could not understand the idea in his mind. I smiled! That's a sad reality. In 2006, when I approached the banks, most of them found my business idea as a risky investment because they could not evaluate in a tangible form. At that time the word startup wasn't really a buzz and you would not hear of incubators. Yes, you'd hear of SME partners and government giving a boost to those. However, when you knock the doors, you're disappointed to find that your project needs to be tangible. For example, if you come up with a poultry farm project, chicken can be counted & number of eggs estimated, with a farming project they can evaluate the potential of vegetable output, with a pastry business they can count up cakes... But unfortunately with my idea of renting computing power, nothing could be calculated.

startup-incubators

I came back home, re-wrote my business plan and this time I counted the number of colleges in Flacq region (where I planned to start business), I highlighted the fact about low ICT penetration in rural region (which I would solve by renting the services), showed the need for computing & printing facilities as per demands from school projects etc. Now, a bank could understand that a cybercafé might be a good business. They still did not understand the idea of renting the computer & not just giving Internet-access. Well, never mind I got my first break.

Issue 2: Unforeseen expenses

Say, you have the idea and money. You start implementing. Oops! Your business model may be fine, people will like your solution but what about business strategy? The time between you starting a business and people knowing about your service, you do have expenses. The bank who has given you a loan isn't waiting for things to stabilize before you start repaying. You get the money and from that very same moment you owe them with interest running and you need to start paying by the end of the month. You have rent with taxes, utility bills at business rate plus the tax, you need to care for your staff and so on. I was then 22 and I felt like 40 years old already.

Things do not necessarily happen as you plan & in the timeframe you expect and all those elements conspire to put hurdles at every step. At the young age you also have tons of ideas shooting in your mind for every bit of obstacle that shows up.

startup-ideas

This could be yet another pitfall. You have tons of responsibilities on your shoulders and you might not be thinking with a clear mind. Ideas that shoot up might be good as they might be bad. Since, you have no one to evaluate those, you might end-up picking the wrong ones. As a matter of fact, I did have tons of ideas to counter every downside of the business but again for each of those I would still be faced by one hurdle; the banks want to see profits before financing anything else! Ahaan ... You're now in the trap. If you do not succeed in the first one, you're tagged as a failure. Thank you banks! I am now bound to re-pay you for my first failure and that's gonna take away years from my life. I still recall how my body would go cold when the bank would send a seizure letter. Aaah! Hard work? No one cares. It's money that matters. On the young shoulders I had at that time I continued carrying the burden of an unstable business, denial of finance, and the guilt of maybe-I-am-risking-my-father's-property.

In the past years, I lost a lot in terms of the youth-time, people I loved, moments that were precious to me, for the failure of not doing business right at first try.

To be frank, I'm retired from doing business. I am good at finding solutions to problems and that's what I am doing for the company I work. People often trigger the button again saying, "Ish, your ideas are great. Why don't you start your own business?". I keep calm & say, "I'm done with that."


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