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Innovate and Market: To Succeed
There is a need for it to mature quickly so that the failure frates come down. The policy push must enable this.
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Some of the most successful start-ups in our country are Paytm, valued at 16 billion, Oyo Rooms at 10 billion, Ola Cabs at 6.32 billion, Byju's at 5.75 billion, Swiggy, at 3.3 billion, Udaan, at 2.3 billion, and Zomato at 2.18 billion all in US dollars. For each of these successful ones, there are at least 10 failing every day. Women entrepreneurs occupy only 14% of that space. We are the third largest start-up ecosystem in the world, but have dropped 6 places to the 23rd spot this year, according to the global start-up ecosystems ‘Startupblink’, a global research centre. What are the reasons? Slow internet speeds and power outages besides many operational flaws. What then is the Indian Start-up story?
‘Startup India’, a great initiative of the Government of India, along with another notable initiative ‘Make in India’, have the potential to pitch the nation as a future manufacturing hub and rewrite the Indian growth story. What they have done to the entrepreneurship world is that the hand-holding was simplified, funding and incentives improved and Industry-Academia partnerships and incubation was promoted. A start-up must have been operating for at least 10 years with an annual turnover less than ₹100 crores. Simply put, a start-up is any company started by an entrepreneur to seek, develop, and validate a scalable economic model.
The country has about 50,000 start-ups, as in 2018. 1300 were added in the succeeding year which meant 2-3 tech start-ups added every day. That is a stupendous growth. How many of them actually survive? According to the findings of a survey by the Institute for Business Value and Oxford Economics, 90% of our start-ups fail within the first five years, reasons being weak managements committing mistakes in multiple areas. If these are credible numbers, more than 1,000 of those 1300 won’t make it to the year 2025. Further, they are weak on strategy, building a product that no-one wants to buy. Several of them even fail to do enough work to validate the ideas before and during development. Some may be strong on ideas, but may have been pushed before their time.
Guruji.com, a crawler-based music search engine failed in 2012 even after raising 15 million dollars due to unethical practices. Even Nivio’s innovative product, a Windows-based online desktop that enabled users to access a personal virtual desktop from any device connected to the internet that raised 21 million dollars folded up without a trace.
Many ideas are just imitations of successful models like Amazon and Flipkart with no vision. Some start-ups give unrealistic discounts to attract customers leading to greater investments with low returns. Eventually they shut shop for lack of marketing strategy or sustainable business models. Entrepreneurs thought food delivery start-ups were great ideas. However, the sheer number saw an overcrowded market that failed them. A Bengaluru-based food-tech startup ‘Etable’ started in 2012, connected online community of foodies who had conversations about food reviews, check-ins and recommendations just folded up two years later. ‘Taskbob’ another bright Mumbai based start-up facilitated high-quality professional services including drivers, electricians, plumbers, carpenters and maids on demand. Certainly, a sustainable idea but failed to sustain. Several notable angel investors having funded these start-ups, have failed to shore up these and other ideas like those that offered customized news stories on AI powered platforms, or on-demand subscription-based lunch and dinner to customers, a pan-India internet first restaurant or those that offered home grocery delivery services. Have these suffered from low operating margins? Did these start-ups try scaling prematurely leading to unsustainable growth?
Do successful western models when adopted in the country succeed? They may fail for want of appropriate eco-systems. Some start-ups even after attracting a lot of venture capital investments failed, for they aped a successful western model with unrealistic goals, lack of innovation and excessive pressure brought upon to deliver. Eventually productivity decreased. Diminishing returns followed, forcing shut downs.
A business acumen and experience is required to survive the many challenges of Start-ups. The models need to be tested when scaled. Pilots succeed in controlled environments but often fail when they are scaled. A market survey is seldom carried out. ‘AUTOonCAB’ and some other taxi and auto aggregates failed to read the Uber model correctly, moving into oblivion. A Bengaluru-based hotel aggregator ‘Stayzilla’ closed shop after 12 years in business for lack of effective local network, inability to expand quickly and provide cost-effective services. A Mumbai-based Health-tech start-up ‘DocTalk’ founded in 2016, enabled the patients to connect with doctors while sharing medical reports and obtain prescriptions through its mobile app. It should have been a successful start-up during Covid times and Tele medicine, but had to shut shop before the pandemic broke for its inability to pivot its business model.
E-commerce is important if the start-up industry has to succeed. Can e-commerce drive the new start-up markets successfully? With growth in technology and easy availability of bandwidth, buying and selling transactions online has seen a rapid rise. However, another Mumbai-based e-distributor platform ‘Just Buy Live’ that connected the shopkeepers directly with the brands and distributors, too closed in less than five years due to its unscalable business model that led to negative cash flows. The competition among the players of e-commerce seems to be levelling up each day.
So, are these e-commerce models sustainable in the long run? The major online companies do invest in e-commerce players. E-retailing research shows that there is ample space left to explore in the e-commerce domain. Entry of foreign investors in this segment may help. The completely mobile younger generation, with access to mobile phones, smartphones, tablets and other such electronic gadgets are the real drivers of sustainable e-commerce business models. A recent HSBC report pointed out that e-commerce alone could create 12 million new jobs over a decade. Even the online vs TV advertisement markets vie for their appropriate space in a market that is driven by e-commerce and e retailers. A serious concern in this sector however, is customer segmentation for more profitability.
Some start-ups have invested in e commerce and have been launching strategies of discounting and heavy spending on advertisements for profits. Instead of profits, they have been facing huge losses affecting the entire retail sector. Even companies like Snapdeal, Flipkart & Jabong have losses to contend with. The losses show that better and stronger business models are required to succeed in e-commerce. In spite of a majority of them closing, the start-up eco-system in the country is vibrant. There however, is a need for it to mature quickly so that the failure frates come down. The policy push must enable this.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.