It is of common knowledge that a lot of VC and angel investors from India and abroad are actively investing in Indian startups. Over $3.84 billion was pumped into the ecosystem in the third quarter of 2015 itself. However, we have been observing that despite having raised good investments, many startups struggle to survive the competition and are eventually forced to shut down their businesses.
I recently got to meet a number of Indian entrepreneurs across sectors at Startup India Rocks, a two-day conference organized by Scaale in Goa on the 7th & 8th of October . It was a good chance to hold direct confabs with startup founders and cultivate a deeper understanding of the dynamics of the ecosystem, the common challenges faced by native startups and a few more insights that could help one get the fundamentals of running business correct.
It is extremely important to find out and resolve the factors that are preventing growth and sustainability of startups in the country. Below are the 8 key things, influencing the failure or success rate of startups in India, according to founders and mentors of various startups.
Right Talent Acquisition
India is known for its affordable pool of talent, especially when it comes to technology. However, when one is starting up, talent acquisition becomes a pain, given that not everyone is flexible enough to work in a startup.
Upon being asked about the major deterrents on Indian startups’ path to a faster growth, Chirag Garg, CEO, HyperDell, exclaimed, “I see a lot of roadblocks actually! One of them is the fear of failure.
Affordable talent, and the right time for the required talent is another challenge.”
Failure to Mitigate the Gap Between Burn Rate and Revenue
Of late, it has been observed that once VC-popular food delivery startups, are now running low on cash. Amidst the growing competition, it becomes imperative for startups to scale up fast, and this is where external funding comes in. Startups and Investors go hand in hand, several Internet companies delay putting in efforts for revenue generation and focus more on raising investment. When fundraising comes to a halt, troubles start.
Chirag maintained, “I think the right management of your burn rate is really a big concern”. Citing an example of Local Banya which shut its operations a couple of days back, he said, “Many a time, we observe that as soon as a startup gets funded, it loses its conscious approach to the burn rate and goes haywire.
Third Party Growth Decelerators
Similarly, when I approached Sneh Bhavsar, CoFounder and CEO, OoWomaniya with the same query, he asserted, “It is really interesting how the problems are evolving along with the evolution of startups in India.” According to him one of the major issues is “the influence of external organizations” that is -businesses, incubators, institutes and all such organisations which are trying to control, manage, take advantage for their events, brand or just numbers, be the daddies of the start-ups and entrepreneurs in the name of helping, mentoring etc. He added, “In Ahmedabad, I have seen the most innovative, fast growing startups which also started making profits – they all were self-dependent, never incubated or mentored. Yes, they may have grown slower in early stage but on any day it is better as they are profitable, sustainable. There are more daddies than kids in india’s startup ecosystem.“
Lack of Mentorship
Lack of proper guidance and mentorship is one of the biggest problems that exists in the Indian startup ecosystem, believes Milan Hoogan, Vice President -Sales and Marketing at Erfolg Life Sciences. He is of the opinion that the current startup ecosystem consists of a lot of young talent coming out with some very unique ideas. These ideas have enough fuel in them to propel most of these start-ups to great heights. But, one of the biggest factors that slows the growth of these companies, is the poor quality of mentorship they get. Most of these organizations are good with their ideas and/or products, but have little or no industry, business and market experience to effectively get their products out.
Hoogan says, “I think having a good mentor right from the early stages, can help these companies in not only capturing the markets faster and have the first mover advantage, but can also help them in strategizing each of their steps from a more experiential standpoint. Plus, a mentor brings with him/her, a huge professional network that can be a huge bonus for the entrepreneurs. One of the best ways to find a good mentor is to be networking all the time. Meet new people, take part in the start-up based networking events, discuss about the industry and your ideas to improving it, learn about their respective stories.”
Lack of a Good Branding Strategy
Absence of an effective branding strategy is yet another issue that bars startups from flourishing speedily. Giving insights into the subject, Hemant Arora, Business Head – Branded Content, Times Network, said that branding is one of those areas in a business that demands paramount attention. However, given the question of affordability, many startups struggle to build a good branding strategy for their businesses. Arora maintains, “branding has to be a commitment. In fact, almost like a spiritual commitment for entrepreneurs looking at pacing up their product’s long term commercial success. Branding starts at the same time as the business does…it’s like a baby being born and given a name so that people can identify it with that name. Then comes the process of making it popular which is what advertising is all about and that is completely objectivised.”
During his session on the subject, Arora gave a very lucid yet striking definition of advertising- the essence of advertising lies in the ability to influence your target audience positively towards your brand.
Fragmented Market and the Dearth of Domain Knowledge
The largely unorganized and fragmented market in India stands as one of the biggest hurdles for startups on their way to success. Umesh Chhikara, CoFounder and CEO, Inkhorn Publishing India is of the opinion that before foraying into any business, one must cultivate a strong domain knowledge. “Consumer behaviour changes every 30 km in India, which makes it a highly complex, diverse and unorchestrated market.” Chhikara opines that it’s very easy for startups to bag capital these days. However, what is not easy is building a strategy to move ahead and capture the larger market. Only a few have managed to spread their footprints across the country. Most of them usually get stuck in stagnancy and eventually, shut down.
Silicon Valley Replicas Topped by Infrastructure Deficit
Emulation of ideas and business models is a common tendency that startups in India need to get rid of. Koushik Shee, Founder and CEO, Effia, questions Indian startups’ infatuation with Silicon Valley models. He stated that most of these business models have been replicated from the West. Hence, few are profitable despite raising fortune. “One must understand that ours is a very different scenario. Hence, we should build our models based on our market. India has a huge potential given that most of the market is still untapped due to the lack of internet penetration in rural and suburban areas owing to the issue of affordability and infrastructure deficit.” Nevertheless, Shee hopes that with Digital India initiative, things are going to change for good.
Struggle to Reinvent Constantly
Last but not the least, Namrata Garg, Director, SendKardo, opines that customers today are very adaptable to change. “The biggest challenge is the need to constantly reinvent yourself and come up with a service to be able to match up customer expectations. Having said that, I would also like to add that this ‘roadblock’ could as well be converted into a big opportunity. Also, certain services provided by earlier applications have become pre requisite for customer today. So, you need to be providing something over and and above constantly. It’s all about providing the wow factor.”