Why Do Indian Startups Fail?

Being the boss of your commerce sounds exhilarating, doesn’t it? The term start-up has been evolving all over the world over the past few years. A start-up, in short, is a budding company or a venture initiated by one or more entrepreneurs to create and develop a product or deliver a service. Start-up companies are generally modest and initially, they are started with a very small budget. Though there are no hard or fast rules for start-up companies, it is very essential for them to have a stable business to be able to bring their companies in par with the top contenders in the market. These companies most often don’t have a fully developed business model, proper guidance, and support. Above all, the failure of these start-up companies is mainly due to a lack of capital. So, this article will give us a brief run-through of why the majority of Indian start-ups don’t do well and don’t rise to the level they could and the ways to overcome these failures so that the companies can reap some benefits.

WHY DO STARTUP COMPANIES FAIL IN INDIA?

Statistics say that India has the third-largest start-up ecosystem. Despite having this advantage there seem to be evident flaws in the Indian start-up methods which lead to failures even before the inception of the company. There are many false intuitions, beliefs, and information that may not give proper aid to gaining success.

The failure story of Doodhwala is an apt example for the upcoming entrepreneurs to learn from the mistakes Doodhwala made in order to build a good business strategy. Let’s see what it was: Doodhwala was a start-up, founded in 2015 by Aakash Agarwal and Ebrahim Akbari. The company delivers milk in some major cities like Bengaluru, Pune, and Hyderabad. They deliver more than 30,000 liters of milk per day. Doodhwala further connected the milkmen of different areas for daily sources of fresh milk. They targeted all the people who required fresh milk in India. In this context, it can be clearly seen that the Doodhwala team has extended its business all over India. Within a short period after their expansion, Doodhwala’s founders announced that the company is no longer functioning. This might seem surprising to many people. But what can those who are planning to start a company take away from this incident?

Doodhwala failed to be successful because they lacked patience. Despite branching out all over the country, Doodhwala failed to keep the competitors in mind. A strategy they could have considered was to build the business concretely within a particular or specific region. Later as the business takes off, it is advisable to branch out. This could have saved the company and its employees from losing their source of income. The concept of “Slow and Steady wins the race” was not considered in their case which might have aided their company’s welfare.

Potential investors must not invest in the projects that exceed their budgets, without having a strong belief in the ideology behind the project.  There are thousands of similar stories out there that can give examples of a failed Indian start-up company. And each story gives a separate reason or cause, that resulted in the decline of the business.

Some of the following reasons can describe or explain the majority of Indian start-ups don’t have a proper launch.

• Any youngster with dreams of setting out into the world, venturing alone, aspiring to be an entrepreneur cannot make it all alone. Though limitless passion can be found in an individual, it can never become successful without experience, which is supposedly the best teacher. Therefore, a lot of Indian youngsters, budding entrepreneurs, are lost as to how to begin or go ahead with running a company. Talking with an experienced individual provides proper insightful knowledge about the field, aiding in the functioning and strategies
• The foremost of all the stumbling blocks that a start-up business can face is the lack of finances. One must be able to have decent funding before beginning a business. Earlier Indian start-ups were often funded by Chinese companies like Alibaba and Tencent, but then, new laws were popped up by the FDI saying that the neighboring countries who are trying to invest in India are supposed to undergo a series of processes. This has reduced the chances of funding. In India, the government has become very stringent and it has become a very tedious process for investments from the foreign countries which eventually decreased the funding rate in India. Other economies like Bangladesh were found lenient when compared to India.
• Due to these reasons, entrepreneurs risk their properties by giving them as collaterals to the lenders. Then, they must be able to find financially sound investors who can invest in a dream project. Continuous cash flow is mandatory for the business to run smoothly. Even if the accounts and reports show profits, lay in payment from the customers affects the business largely. Hence it is wise to have cash readily available as a backup.
• Start-ups depend on the owners based on how uniquely they function. The innovative ideas and the constant brainstorming between the partners, employers, and employees keep the mind fresh and kick-started always, helping it get better aid for the wounded business.
• Even great products can fail in markets if they do not reach the customers. Advertising one’s product is how the owner of a company raises its bar in an extremely competitive market. Through advertisements, the features of a product can be easily explained to the consumer market thereby attracting a pool of customers who are need for your products. Other clever strategies will be to provide the customers with offers, discounts, and sales.  Hence marketing plays an important role in the success of a start-up company. Learning about the competitors’ strategy can also give an upper hand in devising strategies to increase your status.
• “It is during our darkest moments that we must focus to see the light.” Distraction is a deadly virus when it comes to any task, especially for start-ups. Since entrepreneurs are already starting from the ground up, focus and dedication are key factors to always be kept active in the business. Having a very disoriented owner or manager will prove to be destructive for the entire team. The Entrepreneurs should constantly be up to date on the schemes and policies issued by the government and utilize those schemes and policies to their advantage. 

HOW CAN A START-UP BE SUCCESSFUL?

As helpful as failure stories can be, learning about success stories of the start-up companies can be really encouraging for the blooming start-ups and aspirers in India. The beneficial strategies and principles followed can be of great help to uplift the rising company.

The growth that red Bus, a famous online ticket booking platform has attained is remarkable. It was started in the year 2006, by Phanindra, Sudhakar, and Charan. They were working for a reputed MNC. The idea behind redBus stemmed from a very common problem – unavailability of bus tickets to go home during Diwali. This idea blew up into the now successful travel website. They had achieved success mainly because their concept was new and unique. Hence, an innovative idea is mandatory for a business start-up.

Flipkart, another great symbol of is Indian start-up success, was started in the year 2007 and initially, they started selling books. Sachin and Binny Bansal, who had worked with Amazon before, took inspiration from Amazon and introduced a similar concept to the Indian online market. Now, Flipkart.com is a globally popular e-shopping platform that has become on par with the company it was inspired by.

Ritesh Agarwal, the founder of OYO rooms is another successful entrepreneur. It is hard to believe that he started his business with just 50 bucks. He recreated a room and rented it. So here, his creativity and confidence led to success. This idea, quick thinking, and obvious business talent has made him a multi-millionaire with millions of customers checking into OYO rooms everywhere in the world. His hard work has grown to be an example for other budding entrepreneurs.

The Indian Government is taking measures to help the entrepreneurs for their start-up companies, with our PM being very particular about the ‘Make in India’ campaign. Therefore, young companies and entrepreneurs can avail of the schemes provided by the government to level out their playing fields.

The MSME (Micro, Small, and Medium Enterprises) development forum is doing its best to support the start-up companies. Credit Guarantee Scheme for Start-ups (CGSS) is a scheme to provide business loans to micro and small industries without collaboration.

The government is promoting these schemes believing that these initiatives will help bring up more entrepreneurs from India. With the continuous support from our government, Indian start-ups can be successful.

The following quote by Jim Rohn is a great motivational kick-starter for aspiring young minds with creative and innovative minds.

“Successful people do what unsuccessful people are not willing to do. Don’t wish it were easier; wish you were better.” – Jim Rohn.

Indian start-ups can also prove to be successful in the global market with proper support, knowledge, and guidance for which help form the government needs to be provided. With these facilities and the powerful young minds that India generates we can become a strong nation within no time.