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BW Businessworld

The Decade Of Startups

Regarding the next generation of IT firms, India continues to send a strong message of intent. There are 20,000 startups in India, of which 5,000 added in the past 12 months

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Digital India - shutterstock_193919333

There has never been a better time to be working in technology in India. Over the last two decades, we have built an extensive and globally dominant IT industry with $170 billion of revenues, of which $110 billion came from exports last year. In total, over 4.25 million people are employed in IT in India. Out of the top 10 IT services companies, in terms of market value globally, five are Indian. The momentum built up to get here is tremendous, and strong fundamentals have been established for this industry.

Regarding the next generation of IT firms, India continues to send a strong message of intent. There are 20,000 startups in India, of which 5,000 added in the past 12 months. The cumulative value created by these firms is around $80 billion, and the space continues to see $8-10 billion of investments every year. With a strong talent base, India is a top startup destination, along with the ranks of the US and China.

The market for startups here has evolved radically in terms of total size and addressability. India continues to leapfrog technology adoption at scale — for mobile phone penetration, 200 million mobile phones are sold every year, and we have over 1 billion connections now. Data rates are converging to be amongst the lowest in the world. Digital India is close to becoming a reality, and we have finally achieved one consolidated virtual market on the Internet for the first time. Every innovation category will begin to feel the effects of the Internet economy on mobile — from leapfrogging credit cards through alternative cashless payment technologies to new paradigms of education and health services delivery.

With all opportunity, we are seeing a Cambrian explosion of Indian startups focusing on solving problems. Many of these will aim to crack problems here before scaling globally. Irrespective of the end goal, there are common threads that bind the best startups: diversity in skills in the founding team, coordination between deep domain expertise and actionable market knowledge, and respect for capital.

A convergence of vision, technical expertise, domain knowledge, and a determination to continuously finesse and sell the value proposition are essential attributes of the capable founders. Some of the best founding teams I’ve worked with have been hyper self-aware and have consistently filled in gaps in leadership as their firms have scaled to become “anti-fragile.” It all starts with the founding team, and the best teams are built around founders that lead by example.

It is also imperative to deeply understand the market you are solving for. A surfeit of tech talent in the country has led to the proliferation of a “build it, and they will come” culture, and that seldom works in an ecosystem like India. The companies that consistently deliver value to their clients are the ones that internalize the pain points from a first-hand perspective and work backward from the needs to arrive at the right solution. This requires intense coordination between product, design, development, sales, marketing, and customer success. Easier said than done, but firms that come out of such frenetic cycles of needs-finding are often the winners.

Finally, it is critical for founders to clearly demonstrate that their market has accepted their product and that they can grow the value proposition through a frugal use of capital. This respect for value is what wins investors over most often, and is the best strategy to use when fundraising in any environment. Remember to build strong feedback loops with your existing investors to gain and maintain trust — your shareholders can be influential evangelists when there is full alignment.

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.

T.V. Mohandas Pai

The author is chairman, Aarin Capital Partners

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