न त्वं विप्रादि को वर्णों नाश्रमी नाक्षगोचरः।
असंगोसि निराकारो विश्वसाक्षी सुखी भव ॥
Startup India is an initiative of the Government of India. Startup India program was launched on 16th January, 2016. Intended to build a strong eco-system for nurturing innovation and Startups in the country that will drive sustainable economic growth and generate large scale employment opportunities. How is a startup defined in India? --It was organized by The Department for promotion of industry and internal trade (DPI&IT). A startup defined as an entity that is headquartered in India, which was opened less than 10 years ago, and has an annual turnover less than ₹100 crore (US$13 million).
Startups, in India as in many other parts of the world, have received increased attention in recent years. Their numbers are on the rise and they are now being widely recognised as important engines for growth and jobs generation. Through innovation and scalable technology, startups can generate impactful solutions, and thereby act as vehicles for socio-economic development and transformation.
To be eligible under this scheme, a start-up must be incorporated as a Private Limited Company under Indian Companies Act, 2013, a Limited Liability Partnership (LLP) under Indian Limited Liability Partnership Act, 2008 or a partnership firm under the Indian Partnership Act, 1932.
The Indian startup ecosystem#Today, India is home to the third-largest startup ecosystem, going by the number of startups and unicorns. The country is right behind two global superpowers – the US and China.# has evolved dynamically over the last two decades. Some startups were founded in the 2000s, but the ecosystem was still immature as only a few investors were active and the number of support organisations such as incubators and accelerators was limited. Some successful exits[2] occurred in the late 2000s and in the last ten years, the number of startups increased fast and more support has become available in all dimensions. Bangalore has emerged as India’s primary startup hub, but significant founding activity is also taking place in Mumbai and the National Capital Region (NCR), as well as some smaller cities.
The aim of this study is to provide a comprehensive understanding of both the growth drivers as well as the challenges faced by Indian startups. Further, the study investigates how the startup ecosystem has developed over the years and describes where and which kind of support is available. While the primary focus is on technology-driven startups, the study recognises that non-tech, social and micro-entrepreneurs have also come up with innovative ideas and solutions.
To provide insights on these issues, a qualitative research was conducted. Semi-structured interviews were done with experts in the Indian startup ecosystem, including startup founders, investors, and representatives of support organisations (see Annex for more details on the research methodology, including the list of interviewees). A literature review was also carried out to provide further background information.
The rest of the paper is structured as follows. The second section outlines the key opportunities and growth drivers of India’s startup ecosystem, as identified through the interviews. Section 3 then outlines the challenges facing startups in India. The penultimate section describes how the ecosystem has evolved, and where and what kind of support is available to help startups overcome challenges and seize opportunities. The paper concludes by outlining the imperatives of further action to support India’s startups.
2. Startups in India: Opportunities and Growth Drivers
Startups do not exist in a vacuum but are part of a broader business environment. Thus, the growth drivers of the Indian startup ecosystem need to be understood in the context of various factors: earlier economic reforms and current market trends, as well as the impact of technological change and changing attitudes on the part of government, large companies, and society overall. This section describes the five key opportunities and growth drivers which were identified in the interviews.
2.1 Scope and Characteristics of the Indian Market
India is often described as “the posterchild of emerging markets” for its vast commercial potential for startups. In a country with a population of nearly 1.3 billion people, even niche products can have significant market potential. In the 1990s, economic reforms moved India towards a more market-based economic system. Since this liberalisation, the overall economic development has been dynamic and as of 2017, the Indian economy had a GDP of US$2.726 trillion.[ii] With a GDP growth of 7.0 percent in 2018,[iii] India is one of the fastest-growing large economies in the world. Therefore, the Indian market is perceived as being capable of offering an abundance of opportunities for startups. Startup India is about creating prosperity in India. Many enterprising people who dream of starting their own business lack the resources to do so. As a result, their ideas, talent and capabilities remain untapped – and the country loses out on wealth creation, economic growth and employment. Startup India will help boost entrepreneurship and economic development – by ensuring that people who have the potential to innovate and start their own business are encouraged – with proactive support and incentives at multiple levels. Indian government is serious in promoting entrepreneurship at the startup level and has taken a number of initiatives to ensure appropriate support. In this aspect it is relevant to mention ‘Make in India’ campaign introduced in September ’14 to attract foreign investments and encourage domestic companies to participate in the manufacturing sector. The government increased the foreign direct investment (FDI) limits for most of the sectors and strengthened intellectual property rights (IPRs) protection to instill confidence in the startups. In order to make the country as number one destination for startups, Government of India (GoI) has introduced a new campaign called ‘Standup India’ in 2015 aimed at promoting entrepreneurship among women and to help startups with bank funding. As the Indian economy continues to grow, incomes and purchasing power are increasing steadily. Rising consumption is driven by the growth of upper-middle income and high-income segments of the population, which will grow from being one in four households today, to one in two households by 2030.Along with this, the demographics of the population are another advantage. Half of the country’s population are below the age of 25 years and the youth is aspirational. The nearly 700 million people born through the late 1980s to the 2000s carry material ambitions and have the ability to spend and make those goals a reality.
One of the reasons that China has so many startups is because it also has the most number of incubators among the two countries.
An incubator provides all the necessary elements like mentoring, seed funding, working space and training to help the entrepreneurs grow their early-stage startup into a successful business. Since 90% of the startups fail due to a lack of proper business model, right product, right team, or funding, incubators ensure that these startups have a better chance of succeeding.
China has more than 11,800 incubators that have helped more than 6,20,000 startup companies in 2018 alone. In contrast to China, India has merely over 520 incubators which can support around 6,200 startups every year. At this rate, China can produce 100X more startups every year as compared to India.
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Freedom. Freedom is at the core of universal human values. Freedom of speech, freedom of the press, freedom of assembly, freedom of association, freedom in where to live, and the freedoms to strike, to demonstrate, and to protest, among others, are the forms that freedom takes. Without freedom, China will always remain far from civilized ideals.
Charter 08 ---Liu Xiaobo
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Launch: 2010
Founder: Vijay Shekhar Sharma
Industry: Fintech
Estimated Valuation: $15 billion
Paytm started as a digital wallet in its initial days but has transformed into a completely new payment platform. The fintech service has emerged as the top fintech company even after facing fierce early competition from brands like Freecharge.
Fact: Paytm’s user base grew from 125 million to 185 million three months post demonetization.
Vijay Shekhar Sharma, who was struggling to make ends meet with Rs 10 in his pocket, tasted victory the hard way, and today, he stands as the founder of the billion-dollar homegrown unicorn.
Launch: 2010
Founder: Vijay Shekhar Sharma
Industry: Fintech
Estimated Valuation: $15 billion
Paytm started as a digital wallet in its initial days but has transformed into a completely new payment platform. The fintech service has emerged as the top fintech company even after facing fierce early competition from brands like Freecharge.
Fact: Paytm’s user base grew from 125 million to 185 million three months post demonetization.
Vijay Shekhar Sharma, who was struggling to make ends meet with Rs 10 in his pocket, tasted victory the hard way, and today, he stands as the founder of the billion-dollar homegrown unicorn.
//.
Brainchild of Deep Kalra, an IIM Ahmedabad alumnus, Make My Trip has revolutionized the travel industry over the years. It was originally launched in the US market in 2000 to cater to the needs of NRIs for their Indo-American trips. It launched its operations in India in 2005, starting with flight tickets. After a few years, Make My Trip got listed in NASDAQ and in the next year went on to make 3 acquisitions. It has got worldwide recognition and innumerable rewards.
2. Flipkart
No one would be a stranger to this one! Flipkart achieved massive success a few years back owing to its first mover advantage in the online market in India. Sachin and Binny Bansal, both IIT-D alumni, worked with Amazon before, thus they introduced a similar concept into the Indian market. They started with books in 2007 and now sell almost everything, from personal care to jewellery, from CDs to stationery. It acquired Myntra for around INR 2000 crore.
Flipkart.com has made it to the top five global billion dollar start-up club with a valuation of $11 billion, according to the Wall Street Journal and Dow Jones VenturSource report published on Thursday.
3. Zomato
Launched in 2008, Zomato hasn’t been anything less of a sensation. It covers over 331,200 restaurants in 19 countries. Started as Foodiebay.com, in two years, it was named the most promising internet companies in India. In another two years, it went on to get international recognition.
Deepinder Goyal and Pankaj Chaddah, the co-founders always wanted to create their own path, a path with its own obstacles. Zomato had no funding initially, their growth was excruciatingly slow. However, tables turned very soon and it made Zomato what it is now.
4. redBus
Started in 2006, redBus has grown phenomenally over the past few years. An online bus ticket booking and hotel booking site, this start-up achieved success for its innovative idea of making bus ticket booking easier for the common man. Phanindra, Sudhakar and Charan, the budding entrepreneurs from BITS Pilani initiated this idea, when one of them, Phanindra couldn’t go home for Diwali because he didn’t get a bus ticket. All of them were working for reputed MNCs at that time; it was a huge risk for them to start redBus.in. That risk, however paid off and the rest, as they say, is history.
5. Housing.com
A Mumbai-based real estate search engine, Housing.com was co-founded by twelve IIT-B graduates with the idea to introduce transparency in the real-estate market. What is commendable about Housing.com is the exponential rate at which it has grown. It was just founded two years ago and the response they’ve got is amazing. Despite many hurdles, Housing.com managed to achieve enormous success. It has raised four rounds of funding since its founding in 2012.
6. InMobi
Founded in 2007, InMobi, a mobile ad network giant was a result of entrepreneurship expertise and an innovative idea. Naveen Tewari, an alumnus of Harvard Business School, who had previously worked at McKinsey, wanted to build something which he could call his own. Before tasting success, it had its own set of problems. Since, it operated internationally, people weren’t sure if an Indian company could achieve success.
Despite the obstacles, it has had a great reception around the world; it is now one of the largest mobile ad networks in China. Its growth from a start-up to an MNC is certainly inspiring.
7. FreeCharge
An e-commerce website, FreeCharge was founded in 2010 by Kunal Shah and Sandeep Tandon. It has made mobile recharge free by offering equal value back to the customers in form of retailers’ coupons. It’s success to be credited to the fact that it’s a win-win situation for both the customers and the retailers. Like any start-up, there were many hurdles that FreeCharge had to face- everyone thought that it was too good to be true and weren’t too serious about it.Some retailers felt that the concept of ‘free’ would harm their brand.
However, FreeCharge has been able to overcome most of its problems. Now, they have tied up with various production houses like Sony Pictures, YRF, UTV etc.
8. Ola Cabs
Who would’ve thought that a few years back that booking cabs would be so much easier? Thanks to Ola Cabs, travelling in a cab now costs less than travelling in an auto rickshaw. Bhavish Aggarwal and Ankit Bhati who co-founded Ola Cabs were IIT-B graduates who were working in MNCs before going on the uncertain path of entrepreneurship.
This idea was formed after a weekend trip on a rented car had gone bad for Bhavish. He wanted to bring transparency and convenience to consumers in this area. Last year in october, Ola Cabs has raised around $210 million at a valuation of nearly $1 billion, with this, it has joined the league of the most valued start-ups in the country.
9. Teach For India
A non-profit organization under the Teach For All global movement, Teach For India works towards ensuring excellent education for all children. Founded by Shaheen Mistri in 2007, TFI exists because of a deep belief that every child can and must attain an excellent education. For the same, TFI has a fellowship, wherein it recruits college graduates and young professionals to serve as full-time teachers in low-income schools for two years. Today, Teach For India is present in 7 cities and have 910 Fellows and 660 Alumni working towards eliminating educational inequity.
10. Make A Difference (MAD)
Michelle Obama dances with underprivileged children enrolled in the academic programme of Make A Difference in Mumbai.
MAD has justified its slogan- ‘Don’t Stop BELIEVING!’ in almost a decade of its operations. It mobilizes young leaders to bridge the gap of education inequality. In 2005, MAD’s founders – Jithin C Nedumala, Gloria Benny and Sujith Abraham Varkey decided to visit a boys’ Home in Cochin to spend some time there. Children at shelter homes were talented and had aspirations and so they felt that more needed to be done. Soon, they started going back regularly, just to spend time with the children there. The MAD story started there.
They have various programmes where various volunteers are recruited to teach kids from disadvantaged backgrounds. Currently around 2100 MAD volunteers teach close to 5200 children across India. It has received a lot of recognition from international organizations for its successful operations.
Source/ photos: The Asian Entrepreneur
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4 Comments
Mitali
16.06.2018 · Reply
An Entrepreneur from Indore deserves applause:
This is the story of the banker who turned entrepreneur, a bootstrapped Start-up from Indore (Madhya Pradesh) took this revolutionary step and provided a platform -‘BookMyColleges.com’ which act as a single application platform for various programs like MBA, Engineering, Law, Graduation, etc. (currently MBA/PGDM) which reduces the cumbersome application process.
Today Mr Jain has overcome the hurdles & the company reached from 4 employees to 30 employees and 10 million in sales.
There’s just one catch. You’ve got to start somewhere. Ideas and opportunities don’t just materialize out of thin air only reason behind this startup was to help and guide students because he could not get guidance when he needed it the most.
According to him, BookMyColleges.com is building an ecosystem where students, colleges and schools can build a better India with the help of technology in a collaborative research-oriented method.
After launching ManthanMania Group in 2011 & BookMyColleges.com launched in Dec-2016 an ED-Tech Venture of ManthanMania.
h
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Startup India Action Plan
The Government’s Action Plan will help accelerate the growth of startups throughout India, across all important sectors – in Tier 1, 2 and 3 cities, including semi-urban and rural areas – and includes promoting entrepreneurship among SCs/STs and women communities. The Startup India Action Plan was unveiled by Prime Minister Narendra Modi on 16th January, 2016 to highlight several initiatives and schemes proposed by the Government of India to build a strong eco-system to nurture innovation and empower Startups across India. The 19-point Action Plan, organized by the Department of Industrial Policy & Promotion (DIPP), focuses both on restricting hindrances and promoting faster growth by way of:
Simplification and Handholding
Funding Support and Incentives
Industry-Academia Partnership and Incubation Launch of Startup India Action Plan Startup India’s 19- Point Action Plan
1. Self-certification compliance,
2. single point of contact via Startup India Hub
3. Simplifying processes with mobile app and portal
(for registration, filing compliances & obtaining
information)
4. Legal support, fast tracking & 80% reduction in patent registration fee
5. Relaxed norms of public procurement
6. Easier & faster exit
7. Funding support via a fund of funds corpus of INR 10,000 crore
8. Credit Guarantee Funding
9. Tax exemption on capital gains
10. 3-Year income tax exemption
11. Tax exemption on investments above Fair Market
Value (FMV)
12. Annual startup fests (national & international)
13. Launch of world-class Innovation Hubs under Atal
Innovation Mission (AIM)
14. Set up of country-wide incubator network
15. Innovation centers to augment incubation and R&D
16. Research parks to propel innovation
17. Promote entrepreneurship in biotechnology
18. Innovation focused programs for students
19. Annual incubator grand challenge
stated that, the Startup India is a revolutionary scheme that has been started to help the people who wish to start their own business. These people have ideas and capability, so the government will give them support to make sure they can implement their ideas and grow. Success of this scheme will eventually make India, a better economy and a strong nation. Grant Thornton (2016) [2] define, the startup business as an organization which is an entrepreneurial venture/a partnership or a temporary business organization engages in development, production or distribution of new products/services or processes. Institute for Business Value, India is booming with young entrepreneurs and start-ups but more
than 90 per cent of start-ups in the country are failed because of, lack of innovation, non-availability of skilled workforce and insufficient funding are the main reasons for the high rate of failure.
, “The Indian start-up community, ranked third globally in terms of number of start-ups, has been creating new job opportunities and attracting capital investment. We believe that start-ups need to focus on societal problems, including healthcare, sanitation, education, transportation, alternate energy management and others, which would help deal with the issues that India and the world face. These require investments in deep
technology and products which are built to scale globally. Significance of the Study Starts ups have played and continue to play significant roles
in the growth, development and industrialization of many economies all over the world. Startup is flagship initiative of the government of India, intended to build a strong ecosystem for nurturing innovation. Startup will drive sustainable economic growth and generate large scale employment opportunities and minimize unemployment. Statement of the Problem The emergence of startup wave in India is a relatively a new phenomenon. Today India is undergoing a fundamental shift with entrepreneurship and innovation is being primary catalyst in job creation and solving everyday problems. A decade ago, there is to be only a handful of startups such as Make My Trip.com and Naukari.com. But, now with the success of such as Flipkart, Quicker, Practo, Zomato and Inmboi, the Indian startup eco-system has indeed come a long way. Research Methodology The study is based on the secondary data which has been collected through journals, magazines, newspapers, research papers, books and websites etc. Objectives of the Study
1. To examine the various issues and challenges of startups 2. To identify various government initiatives for the development of startups.
3. To analyze the growth and opportunities of startups
Taking a look at major startup hubs in China, Beijing is known as the world’s unicorn capital. Which is no surprise, considering the city is home to 82 unicorns, which is 40% of China’s unicorns and 16% of all unicorns around the world. Shanghai, Hangzhou and Shenzhen with 47, 19 and 18 unicorns each, are also among the other top startup hubs in China. For India, Bengaluru, Delhi-NCR, Mumbai and Hyderabad are the popular startup hubs. Out of 30 odd unicorns in India, Bengaluru alone accounts for 14 of them.
Most Valuable Startups
Even in terms of size and scale of startups, China comes out ahead with startups giants like ByteDance, which is the owner of video sharing platform TikTok, being the world’s most valuable startup with a massive valuation of $75 billion (Rs 5.6 lakh crore). Followed by ByteDance, Didi Chuxing, China’s ride-sharing giant is valued at $56 billion (Rs 4.19 lakh crore) and Kuaishou, another video sharing platform, is valued at $18 billion (Rs 1.34 lakh crore). These are China’s top 3 most valued startups.
Apart from these startups, China also has rapidly growing technology giants like Alibaba, Tencent, and Xiaomi. These companies are not only enabling China’s internet economy by pumping in tons of capital but also expanding their presence to the world and reinforcing China’s technology dominance. All these technology giants were once just small startups with vast potentials. Today, they have achieved what every startup dreams. They have gone public and continue their rapid expansion across the world.
Comparing India’s three most valuable startups with China’s giants, we have digital payments company Paytm valued at $16 billion (Rs 1.20 lakh crore), latest edtech decacorn Byju’s with a valuation of $10.5 billion (Rs 78,000 crore) and hospitality chain OYO valued at $10 billion (Rs 75,000 crore). The combined valuation of India’s top three startups is $36.5 billion (Rs 2.7 lakh crore), which is less than half of ByteDance’s gigantic valuation of $75 billion (Rs 5.6 lakh crore).
Investments
In terms of investment, China again remains ahead of India but the trend is changing quickly. During the period of January to mid-November 2019, Chinese startups raised a total of $35.6 billion (Rs 2.6 lakh crore). This is significantly higher compared to what Indian startups raised during the entire year of 2019, which was $14.5 billion (Rs 1 lakh crore). However, what is interesting to note is that while Indian startups raised just $14.5 billion (Rs 1 lakh crore), this was the best year for India, compared to $10.5 billion (Rs 78,000 crore) raised by the startups in 2018.
As for China, the investors seem to be losing interest in China’s startup ecosystem which seems to have reached its maturity, compared to a young and bustling Indian startup ecosystem. Even the massive $35.6 billion (Rs 2.6 lakh crore) dwarfs in comparison to $94.4 billion (Rs 7 lakh crore) raised by Chinese startups in 2018. What’s more interesting is that not just global investors are looking towards India but even the Chinese investors are flocking to India to invest. Out of the $14.5 billion (Rs 1 lakh crore) invested in Indian startups, around $4 billion (Rs 30,000 crore) came from Chinese investors like Alibaba, Tencent and Shunwei Capital.
Ease of Doing Business
Out of 190 countries ranked in terms of ease of doing business by the World Bank. With a ranking of 90, China was somewhere in the middle during 2015. However, the country has since been making continuous changes to its policies and has made it considerably easier for entrepreneurs to start a business. Today, thanks to all the improvements, China is now ranked 31.
As for India, the country was on the lower end of the ranking spectrum as it was ranked 142 in 2015. Just like China, India has been making continuous reforms which have enabled the country to achieve a rank of 63 in this year’s Ease of Doing business report.
In 2015, on average, it took 31 days to start a business in China, while a person could start a business in 29 days in India. However cut to today, a person can easily start a business in just 9 days in China, while it still takes around 18 days in India.
The Chinese government has effectively reduced the barriers and cut down the number of steps required to start a business while the Indian government has been slower to remove those barriers so far. However, the Indian government is committed to reducing this time to merely 5 days. So, we can expect to see some more reforms in this direction in the coming years.
While in terms of investments, we know that India has been attracting more and more investments over the years and this is reflected in the report. The latest ease of doing business report ranks India 14th in terms of protecting the interests of minority investors, while China has a ranking of 28 for this index. This means that India provides more transparency and control to its investors as opposed to China which is another reason for the rising investment in the Indian startup ecosystem.
Startup Initiatives by China and India camparision and overview
The Chinese government incorporated ‘mass entrepreneurship and innovation’ program in 2015 and China witnessed what is known as the ‘fourth wave’ of entrepreneurship. The government focused on strengthening entrepreneurship in the country by providing funding support, creating technology infrastructure and revision laws and regulations, making entrepreneurship more accessible.
In 2017, after two and a half years of announcing the ‘mass entrepreneurship and innovation’, the government had implemented more than 400 measures. The reforms were clearly visible as the number of enterprises formed in China jumped by 19% in the year enabling more than 3.9 million companies, which meant that every day more than 11,700 companies were born in China. The government had also set aside $320 billion (Rs 24 lakh crore) for promoting emerging entrepreneurs.
Like China, India started its Startup India campaign in 2016 with the goal of promoting innovation and entrepreneurship in the country. Prior to Startup India, merely four Indian states had a startup policy in place, today, 26 Indian states and union territories have formulated a startup policy to support entrepreneurship.
The government had also established a Rs 10,000 crore ($1.3 billion) Fund of Funds to invest in emerging startups. Out of 10,000 crore rupees, Till date, Rs 3,582 crore rupees have already been invested in 338 startups.
We can clearly see the disparity between India and China. While the government plays a much bigger role in China’s startup ecosystem with massive investments and state-run incubators, India’s startup ecosystem is still largely dominated and supported by private investors. Also, India lacks homegrown technology giants like Alibaba, Tencent and Xiaomi that can strengthen India’s ecosystem by providing investment and mentorship support from within the country without relying on outside investment and also the growing Chinese investment in order to be more self-reliant.
India’s huge diversity in culture, language, ethnicity and religion has proved to be both a curse and a blessing for startups. On the one hand, a startup’s understanding of customers is often limited to certain regions, where they know the local language and local people. This makes it hard for startups to scale their products to customers across the country (see section 3.2 for further detail). On the other hand, if solutions are successful in addressing the needs of diverse customers pan-India, they can likely find market uptake in other geographies such as Africa and Latin America, and even the developed world. In addition, many Indian startups do not only look at Indian problems, but offer customised solutions for markets abroad. For instance, Indian startups often do pilots and serve customers in the United States, where the user base has a much higher ability to pay.
2.2. Technological Change
There is a huge need for innovative solutions, particularly those that alleviate poverty and benefit a large number of people. Given the scale of India and its resource constraints, low-cost, high-impact solutions are required. Technology startups play a crucial role in accomplishing this, because of their potential for scalability and exponential growth.
Over the last few decades, technological change has reduced the cost of building digital products and has provided access to consumer markets. In the past, companies had to set up physical infrastructure to interact with customers, which implied high customer acquisition costs that proved prohibitive for small companies in the same field as established corporations. As India improved its digital connectivity, market access barriers have been brought down. The broadband penetration is increasing fast and the number of wireline subscribers in 2018 is expected to increase by 44 percent over the next four years.[vii] The number of internet users was pegged at 483 million in 2018 and is projected to reach 666.4 million in 2025.[viii] In addition, the government initiative, “Digital Saksharta Abhiyaan”, was started to promote digital literacy and help people become more knowledgeable about the digital world.
Startups rely on market access as well as possibilities to identify and charge customers. Establishing someone’s identity is grit in the wheels of commerce; as the means for identity verification and digital payments have become more widely available in recent years, startups can serve legions of new customers.[x] The Aadhaar biometric ID system, introduced in 2009 and assigning Indian residents a unique identity number, has made it easier for companies to validate information about their customers. Successive Indian governments have also actively promoted both the opening of bank accounts and the expansion of digital payments to promote financial inclusion.[xi] Thus, large parts of the population are now able to conduct digital payments, as well as receive government benefits and subsidies, and therefore become part of the formal economy. Moreover, Aadhaar and the payments systems are part of the “India Stack”, which is envisioned as a new social infrastructure that will “help propel India into the 21st-century digital economy”.Increased financial inclusion, as well as the banknote demonetisation in 2016, led to a boom of fintech[3] startups, which was the top funded sector in 2018.
hope that I will be the last victim in China's long record of treating words as crimes. Free expression is the base of human rights, the root of human nature and the mother of truth. To kill free speech is to insult human rights, to stifle human nature and to suppress truth.
"Liu Xiaobo: 'No Enemies, No Hatred,' Only Courage"
2.3. Increased Political Will and Government Support
The government under Prime Minister Narendra Modi, who assumed power in 2014, put digital transformation at the centre of its plans. The federal as well as some state governments increasingly recognise startups as important engines for economic growth. Moreover, startups are expected to create jobs that will narrow the high unemployment rate in the country. In 2018, startups accounted for 2.64 percent of the total jobs created in India that year; they are projected to create between 200,000 and 250,000 jobs in 2019.[xiv]
The Modi government has made various efforts to support startups. The flagship initiative, “Startup India”, was initiated by the prime minister in 2016 “to build a strong ecosystem that is conducive for the growth of startup businesses, to drive sustainable economic growth and generate large scale employment opportunities.”Measures include a fund of INR 100 billion, financial support for incubators, establishment of tinkering labs, tax benefits, and a simplified recognition process for the setting-up of businesses, among others.[xvi] So far, 14,036 startups have been recognised according to the definition of the Department of Industrial Policy and Promotion (DIPP); 660 startups have received business support; and 132 have been funded. Some interview partners for this paper expressed doubt as to whether ‘Startup India’ has indeed made impact. However, they see the programme as a good step overall.
2.4. Companies Increasingly Seek to Engage in Open Innovation
In an increasingly uncertain and fast-moving business environment, large companies face pressures to innovate ever more rapidly. Their challenge is twofold: to innovate incrementally to grow their existing business, while understanding ongoing changes in their industry and making provisions for more radical innovations. The latter is proving to be difficult, and more large companies realise that they cannot simply rely on internally generated knowledge and on building everything themselves. As this ‘closed innovation’ paradigm loses its relevance, more companies turn towards open innovation approaches.
Thus, companies in India are increasingly reaching out to startups to increase their own innovativeness. They enter into exchange and strategic partnerships with startups, while supporting them with various corporate-specific resources.[xix] These engagements can be mutually beneficial. While a few years ago, corporate managers needed to be convinced of the benefits of working with startups, there has been a recognisable change in attitudes and many established companies today acknowledge the competitive advantages of startups, especially in terms of their speed and passion.
2.5. Changing Perceptions towards Entrepreneurship
Those who are willing to take risks are the ones who can put ideas into practice and seize opportunities. Most startup founders in India have strong intrinsic motivations and report being driven by their passion, curiosity, satisfaction that comes from problem solving, and desire to make a difference in society. Many Indian founders have previously worked at a corporate environment, but despite the stability in those jobs and the benefits of high salaries and other perks, they perceived those jobs as constraining to their creativity. A lack of identification with a corporate culture often leads them to create something on their own, which enables them to define their own values and control their own direction.
Moreover, a change in perceptions among the broader society is noticeable. The success stories of remarkable exits and India’s first unicorns[4] have received much media attention. Subsequently, some founders have become India’s “startup heroes”, contributing to a current image of entrepreneurship as “cool” and “glamorous”. Despite some hype, the social acceptability of entrepreneurial careers is indeed increasing.
3. Challenges
There are typical challenges that startups all over the world struggle with. Certain obstacles, however, are more peculiar to the Indian business environment. In this study, India was often described as a harsh environment for startups. This section outlines the five key challenges facing Indian startups.
3.1. Building and Scaling an Indian Startup
The challenges faced by Indian startups begin with essentials such as hiring and managing a team, dealing with customers, and developing a marketing strategy. In particular, many Indian founders have a technical background and lack business knowledge.
For running a startup, a significant amount of working capital is required. Many startups, especially at early stages, are bootstrapped, i.e. self-funded through the founders’ own savings, or using capital from friends and family. Some startups have enough paying customers, so that they are or become self-sustaining through the revenue and profits they generate and are able to grow organically. Thus, while not every startup needs external investment, many of them start looking for investors as they plan to scale their business. However, finding the right investor and raising funds is difficult, even if they have received positive responses on their product and have some proven market validation.
3.2. Diversity and the Digital Divide
In general, an information gap exists between those who provide solutions and those who are supposed to use them. In order to build successful products, startups need to bridge this gap and develop an in-depth understanding of the customers and their needs. This is particularly difficult in the Indian context: India is a highly diverse country with a plethora of cultures, languages, ethnicities and religions. Because Indian customers are equally diverse, the startups’ understanding of them is often limited to certain regions, which they know well and where they know local people to work with. In that sense, comparative advantages are linked to specific regions. Therefore, building up a pan-Indian startup is more difficult, because they have little understanding of customers in other regions.
In addition, there is a disconnect between the startup founders and the customers, for whom they aim to build products. Most startup founders are well-educated and come from well-off backgrounds in urban metro cities. However, as nearly 70 percent of the Indian population live in rural areas,[xxi] the customers of the mass market tend to come from low-income backgrounds in villages. Due to different living environments, startups often have an insufficient understanding of the customers and their needs.
3.3. Taking Products to Market and Low Willingness to Pay
A further challenge for startups is to take their products to the market as Indian markets appear difficult to penetrate. One reason is the competitive landscape: Often, many firms are already present and many more enter the market, including copycats. A second reason is that startups are at a disadvantage compared to large companies. On the one hand, this is due to the fact that big market players are more capable of dealing with bureaucratic regulations. On the other hand, public procurement is seen as weak and government prefers to sign contracts with established companies. However, if startups are promoted by large companies (for instance, through partnering with them in the context of their open innovation initiatives), they may find it easier to capture a market. A third reason is that communication with and retention of customers takes time and effort. Convincing Indian customers is difficult, especially if the startup develops innovative products and caters to new market segments.
Furthermore, it is hard for startups to generate willingness to pay for their products and services. Despite increasing incomes, the Indian customer base continues to be price-sensitive and has little willingness to pay for products and services. Often customers expect discounts, or buy cheaper versions from China. Therefore, startups face the challenge of building affordable solutions, which is sometimes done at the expense of quality. For this reason, many businesses are volume driven, with marginal returns. For those startups which do not charge customers through means of digital payment, collecting and ensuring timely payment can be another issue.
3.4. Hiring Qualified Employees
For many job-seekers, joining a startup as an employee is not an attractive career option, due to the inherent risk that the startup might fail. Instead, the majority prefer to work for large corporations, which promise more stable jobs. In addition, startups can rarely compete with the reputation and compensation structures which large companies can offer. Many of those who start working for startups, switch to established companies after a few years. Job changes in the opposite direction occur less likely, because many get used to the benefits of a corporate job.
A second reason is that many job applicants are not sufficiently skilled. Startups see a gap between the knowledge taught to students in colleges and the knowledge needed for the jobs, especially in sectors in which technologies change at a fast pace. Because they have little awareness of industry needs, fresh graduates are usually not readily employable from the beginning. As a consequence, when hiring new staff, startups have to invest significant amount of time and cost to train new employees.
A third factor is that a significant number of highly qualified specialists move abroad for jobs. At the same time, and in contrast to many other startup hubs globally, Indian startups are yet to attract international talent. Bureaucracy and visa requirements make it difficult to hire employees from outside India and expatriates are more attracted to places like Singapore, where the living standard is higher.
3.5. Complex Regulatory Environment
The government of India has introduced policies that aim to ease the business environment for startups. However, the present regulatory framework in which startups operate is widely seen as difficult, inefficient and unpredictable. Indeed, the World Bank Ease of Doing Business index ranks India 77th of 190 countries; the country is 137th of 190 countries in the World Bank Starting a Business Ranking index.[xxii]
Startups in India often feel encumbered by bureaucratic processes, which appear to lack underlying standards. They have insufficient possibilities to find information, and there is little planning security about how long processes can take. In addition, regulations can suddenly change or startups receive random notices. As a result, startups have to find frustrating workarounds, waste valuable time or pivot their business model.
Other challenges concern the legal incorporation and registration as a startup as well as the closing of a business. Despite government’s declared intention to hasten the setting up of a business, the process is generally described as lengthy and costly. It requires many approvals, constituting a high entry barrier. After the legal setup is accomplished, formal registration as a startup is a necessary requirement to qualify for tax exemptions and further benefits. There are specified criteria linked to the government’s startup definition, but few startups fulfilled them. The criteria were lowered subsequently, but startups still seem to face difficulties obtaining registration certificates. Some startups fail, but closing down a business was described as even more difficult than setting it up.
The tax policy and its enforcement are considered unfriendly for startups. This, on the one hand, applies to the Good and Services Tax (GST), which was introduced in July 2017. There is still a lack of clarity on how it works and which items are applicable as tax base or not. The startups are required to file their taxes regularly, even if they do not yet generate any revenue. Moreover, if payments from customers are delayed (which is not uncommon), startups run into the danger of a liquidity squeeze. If they fail to file the tax on time, they risk huge penalty payments. On the other hand, much criticism was directed towards the so-called “Angel Tax”, which was introduced in 2012 with the aim to thwart money laundering.[xxiii] (After the end of the interview period for this study, the government announced in August 2019 that ventures that are registered with India’s Department for Promotion of Industry and Internal Trade, will no longer be subject to the tax.[xxiv])
4. The State of the Indian Startup Ecosystem
Besides the entrepreneurs themselves, the startup ecosystem consists of various stakeholders, including incubators and accelerators, investors, service providers, educational and research institutions, and big companies. This section describes how the Indian startup ecosystem has evolved, and where and what kind of support has become available to startups.
4.1. Evolution of the Indian Startup Ecosystem
The Indian startup ecosystem has evolved considerably over the last two decades. More actors have joined and they provide different forms of support to startups. Thus, the ecosystem has grown significantly and is now in the process of maturing.
Few startups had already come up in the New Economy in the late 1990s, which ended with the burst of the dot-com bubble. At that time broadband penetration was poor, Internet connectivity was low and support structures were hardly available. In the next decade, the situation changed slowly, and more startups entered the market. Some of them performed well, and some exits happened. One watershed was the major investment received in 2009 by the Bangalore-based e-commerce startup, Flipkart. In subsequent years, the number of startups as well as various incubators, accelerators and other support organisations increased fast. During the period 2013 to 2018, between 7200 and 7700 tech startups were incepted, which equates to an overall base growing at 12-15 percent.[xxv] The first Indian unicorn was InMobi, an advertising technology startup based in Bangalore. Since then, the number has increased to currently 19 unicorns, which are listed in figure 2.[xxvii] The US$10-billion One97 Communications, which is the parent organisation of the payment system Paytm and e-commerce platform Paytm Mall, is currently the highest valued Indian startup.
Simultaneously, access to external capital increased significantly. Large funds were set up in India and foreign capital came from investors in the US, Singapore, China, Japan and the Middle East. During an early funding boom, much money was invested into startups with just ideas, and these resulted in huge financial losses. Subsequently, after some funds closed and a cleansing of the market took place, approaches to investing became more prudent. In recent years, the situation began to improve again. In addition, government and CSR programs are also impacting the investment scene.
As the first generation of Indian entrepreneurs have made their mistakes and experiences, more knowledge has become available in the ecosystem. Some of these founders eventually became successful and inspired more to follow their entrepreneurial steps. Moreover, a sense of community among the people in the startup ecosystem has emerged over time. Overall, the Indian ecosystem has now reached a certain size and support has increased significantly in all dimensions.
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At the height of the pandemic, the vulnerability of logistics and supply chains was keenly felt across the world. Traditionally, logistics was considered by many to be an allegedly commoditized function—companies were often unwilling to invest in their own logistics assets, rather outsourcing the function and trying to minimize the share of transportation and warehousing costs in their income statements.1
However, as soon as consumers saw empty supermarket shelves, or, in the case of the UK, closed gas stations, the importance of the logistics industry was drawn to the world’s attention. And businesses increasingly re-evaluated their perception of logistics. According to a survey of managers from global companies in 18 countries, 83 percent of respondents said they had become more aware of the risks associated with transport blockades, production shutdowns, or raw material shortages than before the pandemic.
This shift in awareness resulted in an inflow of capital to the sector at an unprecedented level in 2021. However, the number of funding rounds for logistics startups remained relatively stable—growing only slightly compared to 2020—suggesting that funding rounds are becoming larger on average, according to our analysis.
Investors in the logistics industry have become more aware of the challenges, and the corresponding opportunities for growth, and are investing in new ventures with larger funding rounds.
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4.2. Geography of Startup Support
Most support is available in Indian metro cities, with each city having its own history and local peculiarities and therefore unique ecosystem. Bangalore in the state of Karnataka is India’s primary hub, which is most advanced in regards to the number of startups as well as support organisations and investors. One in every four of total tech startups in India are based in Bangalore. One reason why Bangalore developed as the startup hub is the location of many engineering colleges and renowned academic institutes. The ready-made talent pool then provided a locational advantage, and several Indian as well as multinational companies and R&D centers in aerospace, biotech and later IT industries opened their offices in Bangalore. Three of the four biggest Indian employers in the IT sector, which include Infosys, IBM India, as well as Wipro, are headquartered in Bangalore.[xxx] The city is seen as attractive for people from outside due to its welcoming attitude as well as cosmopolitan vibe. In addition, the government of Karnataka has established a dedicated authority, which seeks to design and implement progressive policies to create a conducive environment for startups.
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Power and money reign supreme in our nation today. Universities count for nothing, and scholarship and ideas count for even less. Love, truth, and sacrifice are meaningless concepts, while betrayal and collective amnesia are taken as a matter of course.
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Significant startup activity is also taking place in Mumbai in Maharasthra, as well as the National Capital Region (NCR), particularly in Delhi, Gurgaon and Noida. Of all Indian tech-startups, 21 percent are based in NCR and 14 percent in Mumbai.[xxxi] In a recent report on the geography of startup activity,[xxxii] all three cities are members of a group of so-called “Elite Global Startup Hubs”, which further include Austin, Chicago, San Diego, and Seattle in the U.S., Berlin, Paris, and Stockholm in Europe, Shanghai and Singapore in Asia, and Tel Aviv in Israel. This group follows the group of six “Superstar Hubs”, which comprise San Francisco Bay Area, New York, Beijing, Los Angeles, Boston and London.
Since Mumbai is the financial capital of India, the city is home to many fintech startups. Startups in the NCR region are active in a broad variety of areas. In both cities, cost of living as well as rents are significantly higher as compared to Bangalore, where affordable office and co-working space is more easily available. In the NCR, culture and social attitudes are considered to be more conservative, which is reflected in a lower social acceptance for entrepreneurial careers. In addition, and in contrast to Bangalore and Mumbai, interview partners in Delhi reported that safety, especially for female employees, is a concern and restricts work place flexibility.
Startup ecosystems are also developing in some further Tier-1 and Tier-2 cities. In the above mentioned report on global startup cities,Chennai, along with Bangalore, Mumbai and Delhi, is considered an established global startup hub, while the cities of Pune, Hyderabad, Ahmedabad, as well as Calcutta are referred to as emerging startup hubs. NASSCOM further mentions Kerala, Jaipur as well as Chandigarh as emerging hubs. Entrepreneurs from these cities receive less visibility and there are fewer support organisations available and less possibilities for founders to interact with and learn from each other. In that sense, these ecosystems are not as mature as above mentioned ones, but there is optimism that positive developments will continue in coming years. In addition, some state governments such as Kerala (“Startup Mission”) and Karnataka (“Startup Cell”) have taken further initiative by introducing programs to nurture early stage startups. There is little support available in rural areas.
4.3. Core Ecosystem Actors and their Provided Support
As more actors have joined the ecosystem over the recent years, available support to startups has increased in all dimensions. Different support organisations exist and their offering varies, according to their institutional missions and to what kind of startups they target. This section gives an overview of core actors and what kind of support they provide.
4.3.1. Institutional Missions and Targeted Startups
The focus of this study is on incubators and accelerators, which, along with the global trend, have emerged in increasing numbers. In 2018, there were at least 210 incubators and accelerators in India, which corresponds to an 11-percent increase as compared to 2017.[xxxv] Business incubators and accelerators can be understood as organisations, which support the foundation and growth of new businesses through different kinds of resources and services. Typically, incubators take in startups without an a priori fixed time horizon and fund themselves by taking rent, while accelerators usually accept startups for fixed-term, cohort-based programs, sometimes in exchange for equity.[xxxvi] Both business-incubating organisations can be distinguished between publicly and privately sponsored ones. While publicly sponsored incubators often are more interested in job creation and social impact, private-independent incubators emphasise profitability, and private-corporate incubators tend to focus on contributions to their mother corporation’s strategic goals.
Publicly sponsored incubators and accelerators in India are associated with and run by academic institutions or industry associations, which consider themselves as non-profit organisations. They receive at least some part of their funding from governmental authorities, as they aim to not only promote the growth of startups, but also consider the creation of employment opportunities and the startups’ potential social impact. Further, incubators, who are associated with universities or technology institutes, aim to nurture entrepreneurial spirit and talent at the campus and to take IP, which has been developed in research projects, to commercialisation. As much tinkering takes place at engineering colleges in particular, these incubators invite teams to basically walk in with ideas. Similarly, incubators and accelerators run by industry associations, target startups at a very early stage and help them with prototyping, developing a proof of concept, validating and launching their products. While university incubators tend to be industry-agnostic, incubators run by industry associations, focus on startups working on upcoming technologies in the industry, which they represent.
There are government initiatives that conceptualise policies for creating conducive conditions for innovation across different technology sectors. While they do not incubate startups themselves, they seek to nurture entrepreneurial talent at the institutional level. They do so by, for instance, partnering with public incubators, providing incentives (e.g. reimbursement of patent filing costs), or setting up a seed fund for B2G (business to government) startups, where can apply for conducting pilots with governmental departments.
Privately sponsored incubators and accelerators include corporate and independent ones. Established companies initiate corporate incubators and accelerators as a platform to engage with startups. They either set them up themselves, or partner with third parties, which can be described as acceleration-as-a-service providers and manage the program on their behalf. The key selection criterion is the strategic fit, i.e. supporting a specific startup should have relevance for the established corporation and contribute to realising their strategic objectives.[xxxviii] Some select startups, which have potential to become future suppliers or customers, or which help the established firm generate leads or additional income through revenue-sharing models. Other corporate incubators and accelerators can be understood as a future exploration tool, as they help the established company monitor and understand what is happening in the market and evaluate new technologies. In contrast, independent incubating organisations, which are run and funded by private business people, target a more diverse group of startups. Their focus is mainly on tech startups, but they are otherwise rather sector-agnostic. Some independent incubators have hybrid business models, i.e. they combine their incubation offer with a co-working space, an investment fund, or an open innovation program. There are also support platforms for female entrepreneurs. Their mandate is to help female founders who face significant challenges in India´s male-dominated business culture.[xxxix]
Further important actors in the ecosystem are angel capital investors, who are typically high net-worth individuals from traditional business backgrounds, who seek to diversity their portfolio. In addition, some founders and senior managers from the first generation of successful Indian startups have become investors. Some of these individuals use angel networks to scout for promising startups and then manage the relationships with portfolio companies. In addition, many Indian as well as global venture capital funds have become active in the ecosystem in recent years. Angel and venture capital investors nowadays tend to prefer startups, which already have a proof of concept as well as some market validation.
The support organisations and investors do not see themselves as competitors, but rather as interconnected and complementary partners. Regular interaction takes place among the actors, for instance through informal exchange or referrals of startups. Moreover, publicly sponsored or independent incubators often tie up with industry partners, which give startups an opportunity to present their use cases and do possible pilots with corporate partners.
4.3.2. Elements of Startup Support
When startups need handholding, the core support dimensions include the provision of office space and infrastructure, business advice and network access, as well as funding.
Office Space and Infrastructure
One dimension of support is the provision of space to work. This includes offices, meeting rooms as well as recreational areas such as a cafeteria or break room. Often, such work environments also have a function room, which is suitable for hosting events with a larger audience. Basic facilities such as printers, coffee machines, Wi-Fi connection, and front desk service can be used by the startups. In addition, sometimes they are equipped with hardware and software, which startups need to build their products. Moreover, a few support organisations also provide access to lab space, where technical equipment such as 3D printers, IoT devices, lasers, and virtual reality headsets is available.
Publicly sponsored incubators have a strong focus on providing physical space to many early stage startups in exchange for a monthly, subsidised rent. One particular advantage of many university incubators is that they can grant access to lab space and facilities at the campus. In recent years, the government has provided additional funding for tinkering labs. Private independent and corporate incubators and accelerators sometimes do not provide space for startups to work themselves, but rent offices in a co-working space such as the well-known chain WeWork. Moreover, some also offer virtual incubation to startup teams, which are based in remote locations. Typically, investors do not provide office space to their portfolio companies.
Some years ago, a gap in the ecosystem existed as space for people to work was missing. However, as more and more incubating organisations as well as co-working spaces opened over time, a lack of space no longer seems to be a big issue. A study on similar organisations in Africa warns that such quick and wide diffusion does not necessarily imply that they are operating successfully.[xl] Indian startups need more than just space to work and many interviewees pointed out that the provision of space is rather secondary, as effective startup support organisations put more emphasis on building a community and getting the right people together. This is in line with research which found that beyond the more traditional focus on office space provision, there is increased attention on providing access to capital and specialised services in order to speed up the startups’ time-to-market and bring them into a common network.[xli] Thus, the provision of further support distinguishes incubating organisations from ordinary co-working spaces. In fact, some self-proclaimed incubators and accelerators were perceived to be simply providing a shared work environment, without giving significant further support.
Business Support and Mediation
Startups (especially younger teams) may have knowledge gaps or lack connections, required to successfully build their business. Thus, startups can receive internal support from an incubator or accelerator’s on-site employees, who serve as a first contact and can help with practical issues and provide some first-level support. They also organise different workshops and seminars; in the case of accelerators typically in the form of a structured program over few months. As startups are co-located and attend courses together, they start interacting, share experiences and give each other valuable feedback. Thus, to facilitate such peer-to-peer learning, incubators and accelerators actively foster an open and collaborative culture. When the internal team lacks the specialised knowledge or resources required by startups, they can assist through facilitating introductions to experienced entrepreneurs or industry experts in their external network. For instance, they do matchmaking with mentors, who can advise startups in one-to-one sessions, or make connections with possible customers and partners, with whom startups can conduct pilots to test their product. In addition, startup support organisations have a pool of service providers, who can give startups pro-bono advice startups in functional areas such as HR, marketing, accounting and legal matters. Furthermore, incubators and accelerators actively build a community through hosting of events, such as informal networking meetups, talks by technology experts, or exposure visits to conferences or international ecosystems. Sometimes, offline communities are in place to promote further networking.
All types of incubators and accelerators aim to provide business support and connect their startups, but they partly have different foci. University incubators, for instance, have an edge in helping startups with hiring, as they can attract students from the nearby campus as interns. The core competence, which corporate accelerators can offer to startups, is to bridge their gap to go to the market by helping them with their distribution strategy and connecting them to their own customer base for real feedback. Independent-private incubators strongly emphasise the value of a community and connecting their startups to experienced mentors in their network. As many angel investors hold, or previously held senior roles in traditional business fields, they could assist startups with their in-depth market knowledge.
Asking for an evaluation of actual business support and mediation provided gave a mixed picture. Many startups consider having good mentors and a supportive environment in which peer-to-peer learning can take place as very helpful. However, some founders said that they did not experience much mentoring and that they would need much more business support. Some founders did find a supportive environment, in which they benefitted strongly from exchange with peers. Others described that little exchange between startups takes place, with honest conversations and empathy being particularly rare. In fact, more important than the business support is that organisations have a strong network and can make connections to the right people locally and in the market. In regards to university incubators it was pointed out that they are often run by academics, who lack practical business experience and thus, cannot facilitate connections to important people in the market. While angel investors stay rather passive in regards to business advice, they can be of more help in connecting startups to people in the market. Now that some first generation of Indian startups has become successful, it is hoped that they carry on supporting the next generation of entrepreneurs. While the quality of business support as well as the strength of their networks may differ, both factors decide whether a support organisation or investor can act as a real catalyst or not.
Funding and Assistance with Fundraising
Finally, startups need money to finance their operations. While some startups are self-sustaining through their generated revenue, others seek to raise external funding, especially if they plan to scale.
Incubators and accelerators typically provide no or rather small amounts of money. Instead, they focus on making startups investment-ready by teaching them how to pitch and giving them feedback on their pitch decks. In addition, they typically partner with a pool of investors and can make introductions to suitable investors. In particular, accelerator programs typically end with a so-called demo day, which offers a platform to startups pitch in front of a diverse audience, which includes investors and corporate managers. If corporate managers see potential in startups, there is a possibility for a continued strategic partnership through which both parties can enter into a buyer-vendor relationship or engage in a revenue-sharing model. While the program itself is not a vehicle for investing into startups, corporate incubators and accelerators are often in touch with corporate venturing units, who could possibly put in money at a later stage.[xlii] Some private independent incubators and accelerators have an attached investment fund or emphasise their strong network, which includes possible investors. One of their advantages is that their mentors get to know the startups well, which helps them to make informed investment decisions. Finally, most significant amounts of capital come from angel and venture capital investors.
Opinions on the actual availability of external funding of startups gave a very mixed picture. Representatives of startup support organisations and angel investor networks, who participated in this study, described a positive development that more capital has become available in recent years. This is in line with findings from a recent report,[xliii] which provides data on the five-year growth of startup cities worldwide. Accordingly, five Indian cities are in the top ten of cities with the highest growth rates in venture capital deals. Delhi, Bangalore and Mumbai already had the highest numbers of venture deals in the previous period 2010-12, but experienced further steep increases: the number of venture capital deals in Delhi rose by 407 percent from 168 to 851, in Bangalore, the number of venture deals increased by 306 percent from 195 to 792, in Mumbai the number went up by 288 percent from 133 to 516 deals. Overall, Indian startups raised $11 billion in funding in 2018.[xliv] Thus, it appears that raising funding has indeed become much easier for startups. However, the interviewed startups reported that a majority of them are bootstrapped and not self-sufficient, but struggle to obtain funds, although they can show a proof of concept and some market validation. The opinion was raised that the numbers of startups who really get funding are very bad.
Naturally, raising funding is a highly competitive process and not every startup is considered promising. However, the huge discrepancy of opinions called for a closer investigation of selection criteria. A few observations became apparent. First, after an initial funding boom, some private investors have “burnt money” and gained better understanding on what works and what doesn’t. As a consequence, many have taken a more cautious approach and now fund more mature startups, which already have a MVP (minimum viable product) and some proven market traction. In 2018 as compared to 2017, the seed stage funding dropped by 40 percent.[xlv] As a consequence, raising funding at earlier stages is not easy for Indian startups. The drought in angel investors, who can provide the first Rs 50 lakh to Rs 1 crore that will enable startups to build a prototype and run some early test with customers is indeed considered the biggest obstacle that Indian startups face.[xlvi] Second, as investors have limited information, they strongly invest in people. Thus, money comes on a trust-basis, which obviously implies that investors fund among known circles and based on similarity, not diversity. Founders, who come business families, graduated from certain prestigious academic institutions and have big corporate names on their CV, are perceived to be more capable. This may partly be true, as they have gone through a filter already. But it is also seen as an “elitist thing”, where others with good ideas but from less privileged backgrounds face difficulty to raise funding. In particular, women entrepreneurs struggle with stereotypes and face bias in the investment cycle[xlvii]. Third, selection criteria mainly aim to identify tech companies, which promise to scale fast and cater to markets, which serve millions of customers.
Thus, the impression emerged that investors predominantly fund startups, which are likely to exit within few years with multiple times of the initial amount invested. Fewer investors have a more long-term orientation and are willing to invest in R&D-intense startups. Further, although more startups are currently entering consumer markets, the ecosystem was described to still be less favorable to startups who develop hardware or other physical products. This creates the impression that in India, many people put a lot of expectations in a basket called tech. Moreover, perspectives were raised that many investors chase trends and fund startups working on advanced technologies, which – despite few interesting use cases – have low relevance to solving more urgent Indian problems.
5. Conclusion
The Indian market offers many opportunities for startups and in turn, startups carry great hopes to promote growth and create employment. Over the last two decades, more startups emerged in India and the associated ecosystem has developed dynamically. Consequently, support has increased in many dimensions: office space and infrastructure, business support in regards to mentoring and networking, as well as the availability of financial capital. There is palpable optimism that the ecosystem will continue to mature. Nevertheless, Indian startups face significant challenges. Overcoming such hurdles will require efforts of all stakeholders, i.e. the ecosystem actors, governmental authorities, as well as the startups themselves. In addition, changes in the broader cultural milieu would be helpful to encourage people taking risks and possibly developing impactful solutions.
Startups do not exist in silos, but are part of the broader economy. Policy reforms improving general economic conditions as well as investments in digital and physical infrastructure (for instance, internet connectivity, roads and public transportation, power and electricity), are expected to also benefit startups. With regards to the regulatory framework, improving the implementation of existing startup policies and removing inefficiencies within the bureaucracy is considered crucial to ease doing business for startups. Reducing necessary paperwork and documentation, improving access to information, establishing more standardised operating procedures and clear criteria (e.g. how to bid for government contracts or get licenses) would help startups. Moreover, it is imperative to channel investments in education to develop a broader talent pool. In particular, ecosystem actors who participated in this study advocated for an integration of entrepreneurship courses in college curricula, which would better prepare students for careers in startups.
While the amount of angel and venture capital invested in Indian startups has increased tremendously in recent years, the ecosystem still lacks resources. In particular, as investors tend to fund rather mature startups, more money is required to help the younger ones develop their prototypes and MVPs. To bridge the gap from ideation to the next step, startups and ecosystem actors hope that governmental authorities can incentivise angel investments by, for instance, abolishing the angel tax or giving other kinds of tax benefits. Moreover, governmental approaches to set up a seed fund and give grants to startups are considered as effective initiatives. In addition, it was pointed out that more startups should be acquired by large, established companies. Moreover, the phenomenon that successful entrepreneurs support promising younger startups, which is common in mature startup ecosystems, needs to further gather pace.
Parallel to the rise in capital, support has also increased in regard to office space and business support dimensions. However, the ecosystem actors are geographically concentrated in metro cities and startups that are not placed in these locations and cannot change bases, may find it more difficult to succeed. Support must be extended to entrepreneurs in smaller tier 2, 3 and 4 cities. Due to given resource constraints, India needs low-cost and high-impact solutions and thus, the focus on scalable tech startups is understandable. However, it should not distract from the fact that valuable solutions could also come from other kinds of entrepreneurial ventures.
Startups rely on thorough market and user research. While they learn some market knowledge from mentors, it will probably not spare them from talking to their users to get a better understanding of their needs. In particular, to overcome the disconnect between startup founders and customers, especially in rural India, they need to do more field research and obtain greater exposure to people on-site. In regards to the difficulty of finding talent, startups may have to widen their hiring net and be prepared to train first-hires. As most startups are not able to compete with large companies in salary, they depend on attracting talent with other incentives, such as giving them learning opportunities. In addition, fostering a good work culture can be helpful to attract and retain talent. Moreover, eradicating the male-dominated “bro-culture” will also help attract qualified women and foster a more inclusive and innovative environment.
Beyond the described support dimensions, another critical factor is how supportive the general culture is towards entrepreneurship. Startups have received increased attention and media as well as popular culture have reported successful exits and featured stories about “startup heroes”. Thus, being a startup founder is nowadays seen as “cool” and the social acceptability of entrepreneurial careers has increased. However, many enterprising people are still being discouraged from pursuing their passions by their families and social environment, and feel pressure to choose a job and lifestyle, which is perceived to offer more stability. Instead, the culture needs to be more encouraging towards people, who take agency and create something on their own. The willingness to take risks should be more appreciated and failure seen with less negative judgement. In addition, overcoming stereotypes is a necessary step to increase diversity, which would help the big ideas of our day get the ecosystem of support they need in order for them to have a chance.[xlviii]
This study collected a plethora of perspectives to the current state of the Indian startup ecosystem. It identified the opportunities they recognise, the challenges they face, and what the imperatives are to strengthen the pillars of support for entrepreneurs.
कार्यार्थी भजते लोकं यावत्कार्य न सिद्धति! उत्तीर्णे च परे पारे नौकायां किं प्रयोजनम् !!
What are the core growth drivers and motivations of Indian founders to set up and run a startup? (Section 3)
What are the core challenges that Indian startups struggle with? (Section 4)
How has the startup ecosystem evolved? Where and what kind of support is available to startups? (Section 5)
To gather insights on these questions, a qualitative research design was chosen and interviews with experts conducted. To qualify as an expert, interviewees must have had significant professional experience in the Indian startup ecosystem. For the data collection, interviews were conducted in the period between February and April 2019. The researcher travelled to Bangalore, Mumbai and the National Capital Region, where most interviews took place on the premises of the startup support organisations. The face-to-face setting allowed for a first-hand impression of the startup spaces as well as the working atmosphere. Overall, 39 interview partners shared their perspectives.
The interviews were semi-structured, i.e. based on a list of guiding questions respondents were asked to share their opinions. Thus, the interviews were guided conversations, which gave interviewees the opportunity to answer openly and also bring up new aspects, which the researcher had not considered before. After each interview, the guiding questions were reviewed and, if necessary, adjusted. The data collection was ended, when theoretical saturation[xlix] was reached and no new major insights emerged. After the interviews, memos were aggregated and insights were analysed to gain a comprehensive overview of the developments in the Indian startup ecosystem.
In addition to the interviews, a literature review was conducted. The aim was to identify relevant literature as well as data, which would provide deeper background information on aspects raised by the interview partners. In addition, such further information was helpful to strengthen the robustness of findings.
Description of the Sample
In order to strengthen the robustness of findings, we sought to capture a wide set of opinions. Thus, a diverse group of experts was selected and interviewed. The majority of interview partners were either startup founders or senior managers of startup support organisations. The support organisations themselves are diverse and the sample included academic, corporate, independent incubators and accelerators, some hybrid organisations as well as one platform specifically dedicated to supporting female entrepreneurs. The sample further included a business school professor who teaches on innovation, as well as representatives from industry associations, VC funds, angel investor networks, as well as a state government initiative for startup promotion.
In regards to gender, 14 of the 39 respondents (35.9 percent) were women. In addition, one non-Indian founder, who operates his startup from India, also participated as respondent in this study. Almost half of the interviewees, 13 out of 27, were conducted in Bangalore, 9 in Mumbai and 5 in the National Capital Region (NCR). Figure 1 provides a comprehensive overview of the types of organisations and experts interviewed for the study.
The startups, whose founders participated in this study, were active in a variety of sectors, as can be seen in table 1. While the initial focus of the study was on technology-oriented startups, opportunities to interview a few non-tech ventures emerged during the course of the study, which provided valuable insights.
In this study, the term ‘startup’ is used in orientation with the definition of the federal government (Dwivedi, A. B. (2016): The government has finally defined the word ‘startup”; accessed: 23.09.2019). Accordingly, startups are understood as entities, which are in the early stages of setting up their operations and work towards innovation, development, deployment, and commercialisation of new products, processes, or services driven by technology or intellectual property.
(no subject)
JUGAL KISHORE SHARMA
Sat, May 21, 9:54 AM
to rallen.pfm, tcurristine, hvaneden, ltorrent, rr-ind
आर्थिक विकासवाद के प्रमुख प्रभावों के कारण सामाजिक स्तरहीनता के विद्रुप-स्वरूपों का प्रादुभाव हुआ है, सरकारी रहमोकरम दया और विकसित देशों के दान पर भलमानस का मकड़जाल गुंथ दिया गया है । क्षेत्रीय विलग जीवन के सहज सरल और आत्मनिर्भर पर भय,भुख और भ्रष्टाचार का शतप्रतिशत प्रकोप ही आ गया है । स्थानीय आय के स्त्रोतों पर संधारित आय और व्यय पर 50प्रतिशत से ज्यादा का डाका डाला गया है, खनिज,व्यापार,उपज पर सरकारी नियंत्रण और बाजारीकरण रेगुलेटेड जरूर हुआ है मायने भी सर्वज्ञात है। शिक्षा,जल,उर्जा,चिकित्सा, आवास भोजन सतत पोषण नायाब है और स्थानीय तथाकथित रोजगार प्रकल्प पर आमजन तक पहुॅच नगण्य है । शिक्षा में पाठयक्रम भाषा,मजमून और आधारभूत ज्ञान के परे रह समूहों की श्रेष्टता का विचरण रहकर केवल बाबूशाही निर्गत तो है सबदूर बेराजगारी उपर्युक्त काम की तलाश दीर्घकालिन सुरसा क्या नहीं है, ही पर ढांचागत विकास ही गायब है । अराजकपूर्ण प्रकृत संशाधनों की प्रचुरता के आर्थिक उन्नययन नाम पर केवल पानी परिवहन विकास दृश्य है । 100एमएल से लेकर 5000 लीटर पेकेज्ड विज्ञापनों भरमार के साथ उपलब्ध है, या मटकी पानी के लिए हाहाकार है।
The main effects of economic development have led to the emergence of squalid forms of social stigma, governmental kindness and charity of developed countries have been entwined with the gull. On the easy and self-reliant life of regional isolation, 100% wrath of fear, hunger and corruption has come. More than 50 percent of the income and expenditure maintained on the sources of local income has been hijacked, government control over minerals, trade, produce and marketing has definitely been regulated, the meaning is also well known. Education, water, energy, medicine, housing, food, sustainable nutrition is unsurpassed and the access to the general public on the local so-called employment project is negligible. In education, beyond the curriculum language, culture and basic knowledge, there is only babushahi arising out of the variance of the superiority of the groups, far-off unemployment. Water transport development is the only scene in the name of economic upgradation of abundance of chaotic natural resources. Available with a plethora of packaged ads, from 100ml to 5000 liters, or a jug for a pot of water.
JUGAL KISHORE SHARMA
BIKANER RAJASTHAN
MOB 9414416705
JUGAL KISHORE SHARMA
Thu, Jul 7, 8:59 AM
Food is the medicine cure from all diseases
Or has been helpful in increasing the ailments.
We have to accept this all the time
What kind of food is strengthening the roots of diseases
And the cost of medicines and treatment is also increasing.
All this is in front of all of us.
Properly selected food keeps the stomach healthy
and aids in the prevention of diseases
Along with good sleep, it also keeps the routine in routine.
Destroys constipation.
Multigrain porridge is the best, but it is useful for all ages in moderation and enthusiasm and it is also a cure for all diseases!
भोजन ही सभी बीमारियों से राहत अथवा बीमारी बढाने में सहायक रहा है । यह हमें हर समय स्वीकार करना पड़ेगा ही किस तरह के भोजन से बीमारियों की जड़ें मजबूत हो रही है एंव दवाईयों और इलाज में खर्च बढ भी तो रहा है । यह सब हम सब के सामने है । उचित चयनित भोजन पेट को तंदरूस्त रखता है और बीमारियों की रोकथाम में सहायक है अच्छी नींद के साथ नित्यकर्म में को सुचारू भी रखता है । कब्ज का नाश करता है । मल्टीग्रेन दलिया सर्वश्रेष्ट है संयमित और उत्साह से सभी उम्र में उपयोगी तो है ही और सभी बीमारियों में इलाज भी!
https://jugals.substack.com/p/benefits-of-multigrain-healthgovs?utm_source=substack&utm_campaign=post_embed&utm_medium=email
JUGAL KISHORE SHARMA
BIKANER RAJASTHAN
334001
91-9414416705
