Prashant Fonseka is the Principal at CF. Fonseka is a tech investor with an entrepreneurial background, who has been establishing businesses, leading organizations, and guiding entrepreneurs for more than a decade. He is committed to solving operational and administrative challenges and helps with brand building. In his professional career, he has strengthened several businesses; raising revenue and helping them realize their goals. He is enthusiastic about contributing to different classes including real estate, public equities, and debt. In an interview with siliconindia, he discusses the challenges faced in the venture capital space while responding to the challenges of early-stage startups.

Past, Present, and Future

The advent of technology has proven to be a catalyst in the evolution of the venture capital landscape. However, the alignment of technology practices adopted with the organization's goal is quintessential to accelerate business growth. For instance, there are more SaaS investors now than ever before, but even they find it difficult to generate revenue. The metrics required and expected from businesses are significantly inflating.

Many startups have mushroomed recently and are leaving no stone unturned to capitalize on the technological boom. However, only a few of them get funded and remain competitive in the market.

When I started my journey in 2013, the digital era was relatively new, and there was a multitude of greenfield opportunities. The cloud proliferation was significant, and most of the companies were expecting new cloud-based software platforms. Progressing further, businesses also made way for mobile applications too, making various attempts in leveraging mobility across their business operations.

Today, as new trends have come into play, the buzz de jour has become AI—transforming their business workflows.

Challenges for Early Stage Startups

Developing a product and newer versions without employing customer feedback has been the cause of erosion of most startups. Several products have deviated from customer interests by a mile, and many companies had a hard time getting their product to the market.

Staying close to customers and taking their feedback at the very first stage helps both customers and enterprises

Startups can avoid such issues by adopting an agile development cycle, which will help in engineering better solutions in reaching out to their customers. Listening to customers and taking their feedback at the very first stage helps both customers and enterprises.

Startups today are working in an environment where there are fewer favorable opportunities as there is a possibility that whatever they are focusing on has already been attempted. Startups should understand what success and failure look like. They should ensure that the problems they are addressing are solved efficiently and uniquely, unlike their competitors.

Opportunities for Small Players

Today, launching a business with little capital and solving the related niche challenges have become easier as the operational cost is lower than ever. A strategic approach increases the opportunities for a startup in building a tool for the utility of several applications and getting early customers to use that general tool is not easy. Also, the tool requires setup, configurations, and learning. With a primary focus on the initial customers, it is easier to acquire and retain them—and startups can make a product that is exceptionally easy. The startups having an engaged approach with customers can accelerate the process of early development of products.

Choosing the Market

To figure out the target market segment, business professionals should establish their company in the space where their passion lies. This will allow the founders to tackle the challenges in that space. In my opinion, tech companies, SaaS companies, and software companies need not be venture-backed.

Tech giants like Google, Facebook, or LinkedIn have disrupted the market in every possible way and have created a multitude of opportunities for many. However, senior care is one area where challenges exist; as such there may still be opportunities to build companies there.

Engaging the Startups

One of the preliminary steps is market validation. Understanding the size of the market opportunity is quintessential. Researchers play a significant role in interpreting the market, analyzing the “invested capital” in a particular space. They usually do a bottoms-up analysis to top-down analysis. For example, there are some companies where we think it would be difficult to get 0.1 percent of the market share, while for others we believe we will get 10 to 20 percent of the market share. For a B2B firm, the relationship with customers is another important aspect. So, markets and customers play a significant role in the establishment of startups.

Advice for Entrepreneurs

Business professionals should ensure that their customers are always delighted. While talking with the customers on a feedback call, some customers can inform that the product was useful and solves the problem, but that is not how a good feedback call should sound. A good feedback call would instead sound like—“Oh my god, this is incredible, this has transformed our business, and we have wanted this for years.” A business can only prosper if its customers are happy.