By Devika Panse
India is going through a “Startup Revolution”. Not too long ago, all an Indian graduate ever dreamt of was a six-figure salary, moving to the United States, and an impressive master’s degree. Most of them did just that. Inspired by the likes of Mark Zuckerberg and Elon Musk, the Indian youth are now set to lead and are bubbling with energy to create something.
The start of startups
Only a few years back, young graduates with an aim to start their own fintech company were deemed insane and a cause of worry for their parents. According to the data from Venture Intelligence, 124 deals worth $5.4 billion were sealed in April—June of this year, while in the corresponding period last year, private equity investments worth $3.3 billion were announced over 145 transactions. It is a lucky year for acquiring funding, with many opportunities up for grabs for startups, which have become a ubiquitous feature of India’s economy.
They are driven by massive funding, consolidation activities, evolving technology and a proliferating domestic market. As exciting as this sounds, it is questionable whether Indian founders and investors have truly understood the essence of a sustainable startup culture.
From 3,100 startups in 2014 to a projection of 11,500 by 2020, startups have gained serious momentum over the last few years. The government, having recognised their potential, has been encouraging initiatives like Startup India since 2016. The process of starting a new venture, which was a rough point for young entrepreneurs, was made easier. Documentation, paperwork, and compliance requirements are now more relaxed.
Ensuring sustainability in startups
To ensure that the startup economy does not end up being a bubble, it is crucial to develop a healthy and sustainable startup culture. More emphasis should be put on increasing awareness about ways to make a startup efficient and sustainable in the long-run. In India, over 200 startups shut down in 2016, according to data analytics firm, Tracxn. The number of startups that were closed down in 2016 was 50 percent higher than that in 2015. The Silicon Valley, New York City and London have bagged the top three positions for the best startup ecosystems, as per the Global Startup Sustainability ranking. Bengaluru is in the 20th position and clearly, it has a long way to go.
Takeaways from the US
By comparing perceptions about startups in the USA and India, areas for improvement in the Indian startup milieu could be identified.
In India, funding is acquired after the business has started generating revenue. This may be a problem for risk-averse investors, unsure of the potential of the venture. However, in the US the situation is more relaxed. The investors are ready to endure the struggle along with the founder by making little or no revenue. That being said, there is a takeaway for investors from this. Startups need investors who are in for the long run, not just to pump in money and sell off the stake in a few years. Investors pulling out of a company hampers its image.
Running a business and making it successful involves trial–and–error, and failure comes more often than we think. Sabeer Bhatia, the founder of Hotmail, pointed out in one of his early interviews that failure is frowned upon by investors. In India, it is not considered a positive sign. Like the over-ambitious kid in school who tops every exam, entrepreneurs seem to feel that failing is a dead end, while in reality, it is simply a diversion from the destination. In India, founders are solely keen on getting funds instead of aiming for organic growth.
Plethora of opportunities
In the light of booming opportunities in India, it is exciting to be an entrepreneur. Resources for startups are growing, Internet access is exploding, and educational initiatives for the startup community are expanding exponentially. Access to networks of mentors and advisors is becoming easier. The best part, the entire world is looking at India as an ocean of ventures to invest in, which is quite evident from the recent investment statistics. It is an optimistic picture, and it is poised to get better.
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