Start up is happening and at that happening big time. The entrepreneurial phenomenon has streaked such a meteoric path that even Microsoft’s top honcho Satya Nadella admitted being overwhelmed by the Start-Up fever spreading its warmth all over the country. Nimisha Sinha scans the scene that is out paint the town anew
If you are an entrepreneur or a wannabe entrepreneur, India is the one of the most exciting places to be where names like Flipkart, Snapdeal, Ola, Quikr or Zomato have become part of the urban legend. Even giant brick-and-mortar stores are being overshadowed by start-ups which are leaving no sector untouched, be it technology, analytics, social or education. Young Indians are striving to be their own bosses and the energy in the market is palpable.
According to Nasscom (National Association of Software and Services Companies), there are 4200 start-ups in India and the space is growing at the rate of three to four new businesses every day. The growth rate is as staggering as 40 percent or so. Approximately, five billion dollars have been invested in 2015 alone in the new emerging businesses and more would follow in subsequent years. Eight start-ups, namely Flipkart, Snapdeal, Ola, InMobi, Paytm, Quikr, Zomato and MuSigma have achieved Unicorn (start-ups having valuation greater than a billion dollar) status. Bangalore alone is home to five out of the eight start-ups.
Why India has become the new hub?
The obvious factor which has accelerated the growth of start-ups is high penetration of internet and usage of mobile. According to Mary Meeker’s Internet Trends Report, there are 277 million internet users in India. It has surpassed USA to become number two in global user market just after China. The surge of Smartphones has led to huge growth of mobile internet usage. According to a TRAI report, there are approximately one billion subscriptions in India already. The rapid increase in internet traffic has also been aided by the substantial increase of data speed over the years.
With high growth in internet and mobile usage, the market focus has shifted to technology-based platforms. From hiring a cab to transferring money, internet and mobile-based technology has taken over almost all spheres of daily life.
Another key reason behind the start-up phenomenon is the rush of venture capitalists and angel investors to the country of over a billion. With 1.3 billion population India is too big a market for anyone to ignore.
But above all, the driving factor behind India becoming a start-up hub is the low barriers of doing business. Cost of setting up business is significantly lower compared to USA and Europe. Also trained and skilled talent pool is easily and abundantly available in the country.
Government policy support
The growth of start-ups in the country and the belief that start-ups can find solutions where others see problems has propelled the Government to acknowledge the importance of the new-age largely technology-based entrepreneurial ventures.
In the Budget 2016-17, the Centre has announced several incentives like a tax holidays, one-day’s time for registration of companies and exemption of capital gains tax on start-ups. Earlier this year, Prime Minister Narendra Modi launched the “Start Up India Stand up India” campaign. The initiative aims at fostering entrepreneurship and promoting innovation by creating an ecosystem that is conducive to growth of start-ups. This is being done to make India a nation of job creators instead of being a country of job seekers. The 19-point action plan action plan of the Government to boost the start-up industry includes compliance based self-certification, legal support and fast tracking of patents examination and relaxed norms of public procurement for startups and providing funding support through Rs 10,000 crore corpus.
Start-up India Action has dozens of policy innovations to foster more creative start-ups. The relaxation of the financial and labour norms is a great step towards making things simpler for young start-ups so they can focus on innovation without getting entangled in certain norms that are more applicable to larger entities.
Changes brought by start-ups
The biggest change effected by the start-up phenomenon is innovation in the market. Innovation is necessary to bring greater economic development. Start-ups are not as big as multinational conglomerates and so much more flexible and willing to take risks. Hence, they are much more innovative.
Innovation can be seen in the emergence of Ekart, the logistics arm of Flipkart. Earlier, known as Flipkart Logistics, it has been spun off from the parent company and rebranded to market it to other ecommerce players as their logistics partner as the most viable option for last mile delivery. Now it has become full-fledged company offering its services to other organisations.
These innovations have also led to healthy competition. With new innovative practices and lower cost models, the established and old companies or systems will have to change to serve the customers better. For example, one doesn’t need to go out of the house to buy groceries anymore. At BigBasket.com, you can get to buy groceries online and then get it delivered in clean and hygienic boxes at a time convenient to you. This disruption of the traditional system of grocery purchase poses a challenge to big hypermarkets. Now these hypermarkets will have to find solutions in terms of value adds, discounts and free home delivery for the customers.
Start-ups also have given a boost to employment. According to a Nasscom report, in India, approximately 80000-85000 jobs have been created by these businesses. Around 65 percent of these jobs are situated in Bangalore, NCR and Mumbai.
Yet, all is not hunky dory in the start-up world. If there are successes, failures are random too. There are many who have shut shops or are bleeding into losses like yebhi.com and donebynone.com. One of the biggest reasons is lack of vision and mentorship. It is imperative for the new businesses to know the market well and understand its needs. Passion needs to be complemented with disciplined approach for success. Entrepreneurs need to have long term vision and see what it takes to sustain in this ever churning market; and then create a solution rather than offering which they think is right. For this a right kind of mentorship is required. A right mentor gives a business critical advice and helps start-ups move ahead.
According to IAMAI and IMRB International, raising funds and revenue expenditure mismatch are major challenges that start-ups will face. Though billions of dollars have been raised, it will become difficult in the coming years to get funding in the later stage from the VCs. Another point of concern is tapping the right kind of talent pool and high rates of attrition. Many a time start-ups don’t realise but there needs to be diversity of skills like sales and marketing, finance etc. For example , in a tech start-up, one would need not just engineers and computer programmers. This will be a blow to millions of young Indians who are making a beeline to IT pegging it as the ultimate mantra of success.
Will the Start- up Bubble Burst?
It is too early to predict whether the start-up revolution will succeed or go the dotcom way. But one thing is for sure, that today youngsters in India are enthusiastic about becoming entrepreneurs and are brimming with dreams and ideas. They are not scared to take risks. In a way it is a good sign for the economy.
With a supportive Government, we can be optimistic about start-ups. Prime Minister Modi’s policy towards start-ups and the Make in India programme are indicators of a supportive environment for young minds who are living the start-up dream. But like in any business a healthy bottom line is what matters.
The author is an MBA and a brand strategist