Indian startups are blooming.
The 2018 Finacial Express Online digs through existing startups in India that excellent valuation jumping anywhere from 2x to 7x in their last funding rounds. Some of these might even turn unicorns in 2019 on the back of high valuations.
As many as eight new startups were catapulted to the hallowed unicorn club in 2018. Fundraising activity in startups again picked up the pace in the year 2018 in mid and late-stage deals, after slowing down in 2016-2017 from the frantic deal-making in 2015 and early 2016. Consequently, eight new startups were catapulted to the hallowed unicorn (valuation of a privately held company at over $1 billion) club in 2018 — the highest number in any year so far. However, the challenges for Indian startups are very much the same, as last year. Here, we take a look at some of the top startup challenges in 2019.
Funding:
Funding continues to be one of the biggest challenges for Indian startups. Earlier banks used to refuse business loans for small ventures. The complex of the loan terms and conditions and endless paperwork often frustrates small business owners. Kiran Mazumdar Shaw’s Biocon too faced funding issues initially.
The situation is improving now. With Angel investment and seed investment, first-level funding (with a small amount) is no longer a big worry. But it getting a large amount of funding is a major challenge, especially in the later stages. Very limited funding is available in forms of larger cheques in India. My thoughts on this are that entrepreneurs should set the goals for the next 5 years before they roll up the sleeves for raising funds.
Government Policies:
India is one of the few developing nations where the government often plays the role of a deterrent in entrepreneurial ventures.
Even though government policies are slowly and steadily increasing, India, by and large, maintains dismal ease of doing business raking as per the World Bank report. Due to a maze of laws and regulations, it takes more of an effort for an entrepreneur to start a business in India than most other countries in the world.
Once you have set up a business, it takes an even greater effort to comply with the sector, department, state, and central laws. The government has taken proactive measures for funding and developing the eco-system, however, we witnessed a slowdown in the start-up space, as there was a dip of almost 50% in the registration of new start-ups in 2016 as compared to 2015; this trend has proved that the policy change has not really given a push to aspirants.
Insufficient Market Research:
An inadequate market is another major business challenge for startups in India. It is very important to know your product/service and your target audience. But it is more important to identify the need for your product. If you can find that, selling your product/service becomes much easier. Know your market, before you start a business. Most startups try to create a product/service that already has plenty of competitors (with better offerings) and overspend on its promotion.
Both naukri.com and shaadi.com were a huge success because the founders identified the need for an online job portal and an online matrimonial site. They understood the need of the mass, and offered them something they have always wanted, but never got.
Lack of Innovation:
Probably the worst of all changes startups face is overdoing the same thing. Most startups in India are afraid of innovation. They are too scared to try anything new or explore unknown territory. But as we know, mediocrity kills. Differential thinking is the first and foremost thing a startup needs to grow as a brand.
Shortage of Talent:
Startups in India or elsewhere need talented resources, more than anything. But this is something difficult to find. Very few people are not willing to leave their well-paid white collar jobs to join a startup. Skilled talent is hesitant to join start-ups, as they are not often willing to take a risky step, by compromising on their compensation and job security.
Many have witnessed in the past mass firing and downsizing. Also, early stage or pre-series-start-ups have lesser pay than their corporate peers. As a result, most start-ups in a bid to outgrow, hire inadequate talent without processes, and finally end up on the losing side.
Wrong Business Model:
A major cause of startup disappointment in India is an improper business model. New business owners are often so much over-enthusiastic about their product; they overlook the ROI it will bring back. The revenue model is either too complicated for the end users to understand or draws too much from the investor. The business model should be such that maximum return is assured with a reasonable initial investment, without compromising on the quality. The revenue model should be simple and easy to follow.
Despite all the oddities and challenges, Indian startups are growing in number. According to a 2018 Economic Times report, currently, there are 39,000 start-ups (in India), with nearly 5,000 startups being added on a yearly basis.
Make in India, offers an opportunity for the Indian start-ups, especially the non-residential or returning Indians, who want to start something indigenous. India is a more closed economy as compared to China, and we do have substantial exports to the US, but this will be unaffected, although de-globalization could have an adverse effect on larger corporations who will scale down operations and become more frugal, this would also present opportunities for start-up companies to fill the
Deep Tech startups, especially businesses driven by artificial intelligence (AI), machine learning (ML) and the Internet of Things saw record funding. The biggest was robotics startup GreyOrange’s $140 million led by Peter Thiel’s Mithril Capital.
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