In defence of small businesses, dear sharks

Personally, their biggest driver to invest was the potential for growth and speed with which it will happen.

Published: 09th February 2022 02:00 AM  |   Last Updated: 09th February 2022 02:00 AM   |  A+A-

Handshake

For representational purposes

I have been binge watching Shark Tank India. It comes as a breath of fresh air for multiple reasons. The biggest of them is the fact that it is one of the rare shows on television without the essential tadka of Bollywood. Second, even with a bit of drama created for TV, it is infusing the viewers with ideas, giving them a glimpse into the world of business, and how investors think and act. I had not seen the show earlier, so I had no base to judge it against and in hindsight, I am happy that way. I knew that the Sharks are real people, as I had interacted with one of them for my first book—The Mouse Charmers. For the pitches, I actually googled the ones I liked to see if they are all real businesses, and yes, they are. Their websites or social media handles were not as great as their presentation on TV but they all existed. The good news is that they saw a sharp spike in sales after they appeared on television. So, even the ones that did not get investment got their spotlight.

Businesses pitching on the show gave me an insight into what entrepreneurs are thinking about. It made me aware of some problems while others were just trying to solve the same issues differently. Food businesses rule big time. There was essential diversity infused with a couple of rural entrepreneurs. Pune sent a lot of ideas, but Delhi and Bengaluru still dominated, while some Tier 2 towns made their presence felt. Overall, the ideas raised curiosity.

Investors gave me insights into how they think before investing. The questions they asked educated the viewers about things that an entrepreneur should think about. They clearly brought out the strengths and weaknesses of the idea, the business model and the entrepreneur carrying them. Personally, their biggest driver to invest was the potential for growth and speed with which it will happen. So any business that did not have the potential to grow very big did not generate too much interest, even if it was a good idea running profitably.

Now, reading between the lines, there are a few things that the show might have communicated inadvertently. Like, an idea is not worth pursuing if it cannot be a unicorn in the future, which also means you will not have the support of the investor community or start-up ecosystem. In my opinion, a business that gives you more than what you would otherwise earn in a job—while allowing you the joy of running a firm your way, creating employment and most importantly adding value to society—is worth pursuing. There may be a few firms worth billions but there are billions of big and small businesses that make up our economic universe. A mother and daughter team doing `27 lakh turnover from Varanasi by upcycling waste is definitely a worthy business. Some businesses may seem to have limited scope or a short shelf life, but then they all have their limits both in space and time. The real goal of a business is to add value to customers and earn well in return before multiplying wealth for investors.

We get to read about a handful of very successful businesses, but remember they are just a more visible part of a larger ecosystem. There are a lot of smaller businesses that form the supply chain or the local hub and spokes of these firms. Unicorns are rare and if you go by the dictionary meaning, they are even mythical. Do we not need a thriving diverse jungle with all its biodiversity, with animals big and small, with those who fly and those who swim, with a self-sustaining food chain?

Second, when Sharks looked at the gross margins, especially for the B2C or D2C products, they looked at a range of  70–80% for the idea to be attractive. Why? So that there is enough buffer to invest in marketing and customer acquisition. Now, think about it from a consumer perspective. Ultimately you are paying for all the advertisements, all those influencers and all that fancy packaging. Let’s take the case of chips—one of the most consumed packaged foods. The cost of production, including the cost of fancy packaging, is less than 30% of MRP. Chips are processed enough to ensure a long shelf life, even if we ignore the elements added to make them addictive. Now, compare it to the bakery next door, where you can buy fresh if not better chips at 40% of the cost, benefitting both you and the manufacturer, without hurting the environment and while nurturing a local economy. If you were watching the show like me, it would give you a strong reason to consume local as well as not pay a premium for products that claim to be purpose-driven.

Having said that, we need more such shows that take us back to one of our oldest roots—entrepreneurship. Who else has a longest living history of global trade and entrepreneurship than India?

Anuradha Goyal

Author and founder of IndiTales

(Tweets @anuradhagoyal)



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