Once upon a time, the shamans and shepherds asked people to follow them into the future. Today, entrepreneurs just go about creating it. 

It’s a good time to be in the business of future creation. The possibilities created by technology, political will, and overall attitudes towards entrepreneurship are all trending in the upward direction. The 107th unicorn out of India just emerged recently, pointing to an ecosystem that is on the path to rapid growth. The first generation of Indian entrepreneurs have gathered battle scars, breakout successes, and cautionary tales. New entrepreneurs – awed, informed and inspired by them – are jumping into a growing community every day.

When there is growth, however, teething problems are never too far. More unicorns are springing up at an undoubtedly fast pace, but many still fail to sprout their horns. What’s holding them back?

The same ecosystem in India has often also been described as a ‘harsh environment for start-ups’. Running a company requires capital. While some founders successfully bootstrap their ventures, most of them require external investments at every stage of their growth journey.

Certain kinds of ventures, such as B2B businesses, could potentially redeploy capital to run their operations (low OpEx) but require large initial capital (high CapEx / R&D costs) to get off the ground. On the flip side, B2C and D2C businesses need a constant infusion of capital, because acquiring and retaining customers is an extremely expensive game – one that is often monopolized by those with the deepest pockets. 

Regardless of the nature of their business, it is crucial for every founder to be able to access capital as they grow. This capital exists, but it often sits gathering cobwebs, waiting to be deployed.

For a country that loves matchmaking, one particular domain of relationships has been severely neglected. Founders and funders can both be found circling around the same pond, looking for the perfect match that continues to elude them.

The information asymmetry that emerges from the lack of infrastructure leaves funders grasping for a needle in a haystack. Worse yet, the fear of missing out can sometimes cause them to invest in “lemons”, banking on distant dreams of lemonade.

Meanwhile, new and first-time founders are usually confronted with an opaque ecosystem that is challenging to navigate. In addition to dealing with the pressing demands of actually building, marketing and scaling their business, they have to identify and win over the right investors at the right stage of growth, with the right kind of term sheet. 

It’s a lot.

While some government intervention has taken place to foster start-ups, significant gaps still remain. Indian start-ups are often encumbered by the difficulties of manoeuvring around company structures – and their resulting tax implications – in an already complex regulatory environment. 

Another visible factor at play is a systemic bias towards investing in the founders from only pedigreed institutions. Great ideas and teams exist in all walks of life – but often go undiscovered because they lack the ‘right credentials.’ This certainly shrinks the pool of “good quality deal-flow” for investors but implicitly also filters out solid founders from non-target institutions from even trying to reach out and get funded.

Nature can lend a useful lesson here about growth. As evidenced by fruits that only bloom with firm roots – it’s all about the infrastructure.

Unfortunately, infrastructural shortcomings are a recurring theme across the globe, exacerbating the difficulties of starting up everywhere. Even developed markets like Europe are not immune to these challenges. Europe generates 36% of all formally funded start-ups, but can only claim 14% of the world’s coveted unicorns. Additionally, European start-ups are 30% less likely than start-ups in the USA to achieve a successful outcome (of reaching Series C funding, going public, or being acquired.) In fact, European ventures fare even worse than their Indian counterparts when it comes to securing successive rounds of funding. So, what gives?

One major factor that accounts for this is the composition of funding sources. European VCs are mostly funded by government and corporate investors, whose motivations differ from the large retirement and pension funds typically backing American VCs. The European LP ecosystem is especially oblique and hard to pin down. It is also driven by bureaucratic mandates that limit capital deployment in non-European funds and start-ups. Ultimately, this limits the overall funding available to European founders. 

These limitations translate to missed opportunities. European start-ups tend to underspend on expansion and pursue less risky exit strategies. Fast growing European start-ups have expressed doubts about being able to raise follow-on capital and opted for being acquired instead of vying to become global players themselves.

The writing is on the wall – the lack of infrastructure and funding support is clearly correlated to entrepreneurial success. 

Simply put, businesses grow and flourish to their fullest potential when entrepreneurs are supported, enabled, and actualised by their environment to do what they do best – put their heads down and whip up innovation that can change the very fabric of society.

But we’re not quite there yet. 

Entrepreneurship enjoys greater visibility than ever today, but it’s worth noting that humans have a biological track record for being suckers for good news. An inescapable survivor bias colours the public proliferation of multi-billion dollar acquisitions, IPOs, and rockstar CEOs. 

These successes are in no way to be discounted – rather, growth is at an all-time high – paved by these coups of excellence and imagination. But to succeed sustainably remains a tall order in a sprawling, ever-evolving ecosystem. For every hundred million dollars that changes hands, countless teams are left behind in the dust. They’re literally called a ‘deadpool’.

As we head into increasingly uncertain times, it has never been more important to have the right people in your corner. The right investors will not only stick with you through difficult times, but also help translate adversity into growth. The right partners can often mean the difference between blowing up and going belly up.

Building the future is easier when you have more visibility on the present. Today’s landscape calls for a new breed of shaman, a new kind of shepherd – the kind that studies the market, understands the ecosystem, and empowers entrepreneurs to build the best possible future.