What is Indian startup ecosystem?
Indian startup ecosystem is the startups and investors in India which specializes in various industries. Not everyone can become a startup entrepreneur nor everyone has interest in startups in India. But, it is now imperative to know about Indian startup ecosystem because it is booming and many people are keen on investing in it. The reason behind this is the potential of Indian startups to grow big, Indian startups are becoming successful at an international level and also investors can face substantial return on their investment (ROI). Startup ecosystem has become one of the most important aspects of development process of startup companies abroad.
A startup ecosystem is a community of startups, entrepreneurial programs, international investors and venture capitalists working collaboratively to develop and grow new businesses. A startup ecosystem provides the necessary resources to create a thriving environment where startups can flourish. The idea behind these ecosystems is to provide an environment that makes it easier for people with good ideas but without background in business or finance to access resources, mentors and capital.
Various investors and entrepreneurs are interested in Indian startup ecosystem because it has the potential to make good ROI. The reason behind this is, many companies in India become global and get good profit, these companies can open investment avenues for investors. These companies are also providing funding for startups who are looking for funding.
Indian startup ecosystem is considered by many as the most weak startup ecosystem in the world, India is a very small country with limited resources and oil; because of this, people are very hard working and innovative. India is becoming an important part of international economic infrastructure and it has been estimated that Indian economy will become one of the top economies next year. It is because of such reasons that Indian startups have started grabbing global attention as well. Indian startups are facing various problems which may hamper their growth.
It is important to note that Indian startups are not worth investing in for those seeking a quick ROI. Companies don’t provide ROI and instead, the company provides return on investment (ROI). The reason behind this is that the startup companies in India are highly complex, they have large production areas, many different products and services provided by small teams of people. In this situation, it is difficult to judge whether a startup or an early-stage company will achieve good profit.
As the startups are finding their place in the market, they are attracting more and more investors. The startups are the future of India and definitely ahead of developed countries. If a startup is making money quickly in a short time period, it creates confidence among entrepreneurs and other investors to invest in startups. Because Indian startup ecosystem is not very helpful enough to most companies on its way to success but it is one of the best things that can happen.
What are key challenges faced by Indian Startup Ecosystem?
Challenges faced by Indian Startup Ecosystem include lack of funds, funding sources, less number of customers and customer interest, unsuccessful business models. Lack of funds is one of the most important problems that a startup faces. The startup needs money to survive, otherwise it will go astray. In order to solve this problem, the stakeholders have different approaches.
Some startups in India are focusing on raising funds through global cheques and bank transfers from foreign investors and source such money from the international market. The problem with this strategy is that there is still lack of infrastructure in India, which provides faster cash flow for startups.
While Indian startup ecosystem is growing rapidly, it has not yet matured and grown into an mature eco-system. There are two major reasons for this problem to be so widespread in the Indian ecosystem. Firstly, there is a lack of first-time entrepreneurs who are capable leaders and managers, allowing them to groom the next generation of startups. Secondly, a lot of startups lack adequate funding which further encourages early stage founders to pursue more prudent goals instead of scaling their company towards exponentially growing in size and market share.
There is no denying that Indian startups are some of the most capable across the world, especially in terms of technology and financial acumen. However, there is a lack of growth mindset among founders themselves, who remain content on staying small than going big. The reasons behind this are various. One of the major reason is that Indian startups don’t seek or even see a growth mindset as an objective. This is firstly because founders do not see it as necessary to grow their company and are happy with being self-sustaining; secondly, because they consider growing too risky and challenging, something that is simply outside their capabilities.
Being a startup ecosystem, it is difficult to make money. They have to sell products and services to earn profits. There are various sources that startups can use to gain their money. Many startups will try to sell products and services on their own; others will raise funds from investors and venture capital firms to get capital for expansion.
Why Indian Startup Ecosystem is one of the most hollow ecosystem across world?
It is quite evident that startup culture in India has gone through a transition phase. The old school entrepreneurs are no longer around to lead young startups, which could have easily been their own sons and daughters; instead, they have been replaced by seasoned professionals with the right kind of experience. Apart from that, technology has made such rapid advancements even within a short period of time that it’s challenging for traditionalists to keep up.
The growth of the startup ecosystem in India is inspirational for other countries. The international perception about Indian startups has started to evolve from ‘pathetic’ to ‘rewarding’. The rapid success and rise of Indian startups has attracted the attention of many investors, who are now buying into the Indian startup ecosystem. Startups in India are at different stages and all these stages require different kind of skills. A startup, which is at an early stage requires no specific set of skills a lot.
Nowadays, people prefer to invest in Indian startups because the startups have a potential to grow into much bigger companies and become global giants in some time. However, there is still a lack of major breakthroughs. To get involved in the startup ecosystem, you need to be ready to take risks and face challenges every day. One of the greatest challenges India has is getting talented people on board who can help build the team well and contribute their skills to make the business more successful.
The Indian startup ecosystem, like other developing economies, is limited by the lack of support or infrastructure. There are a lot of startups in India, which are striving hard to keep their startup alive. The challenging thing about this ecosystem is that it is not very stable and there are a lot of failures that occur over time. The Indian startup ecosystem is held to high standards, especially in terms of the innovations and concepts it produces.
Here are some reasons:
1- Lack of Innovation: From time-to-time, Indian startups experience a phase of “no innovation” in the ecosystem, when nothing new or notable is being done. This is because basic problems of the market get addressed, but not enough venture capital is allocated to address them or ideas are being ignored. However, it should be noted that despite this basic problem getting addressed regularly, Indian startups are not moving towards addressing advanced problems of the market.
The reason behind this is that Indian startups fail to innovate the way they should, because they were never designed to do so in the first place, and are instead constrained by a conservative mindset. This leads to a lack of innovation in the startups ecosystem, even after they have scaled sufficiently by being profitable.
2- Lack of funds: Despite being increasingly popular among the world, Indian startups have still to grow in terms of funding. While it is true that the funding scenario has seen a steady growth, the growth of companies and their success stories are not keeping up pace. While many big Indian startups saw infusions worth hundreds of millions of dollars, they subsequently failed to cohere as a startup which could compete globally. More often than not, startups simply lack adequate funds to support them through initial development phases.
The reason for this is that Indian startups fail to look at startup funding as a means of growing and scaling their business because there is a lack of initiators. While the Indian government has made the country more conducive for funding startups, it is still not enough to make Indian startups grow at scale.
3- Lack of Revenue: Lack of revenue and profit are the main problems plaguing Indian startups. This is mostly because founders of startups often fail to recognize the necessity for a business-minded approach in a product development cycle. While many startups have great products, few realize that it’s worthless without a rigid business approach.
The reason behind this is that Indian startups fail to understand the need of a business-minded approach. This is because there are no firm rules in the entrepreneurship ecosystem, so the entrepreneurs are free to pick whichever model they want and build their own way. As a result, Indian startups don’t have a clear idea of how to build a profitable business for themselves and thus fail to build scalable apps in the initial and later stages of building their product.
4- Lack of leadership and management skills: In Indian startups, good technology is often the major cause for startups getting recognized. However, it is not enough to make a startup successful, or even sustainable. In fact, having good technology without sound organizational and business approach can often be a recipe for disaster.
The reason behind this is that lack of management and leadership capabilities are often neglected by founders while starting up. This further creates a desire among early stage founders to stay small instead of growing into big companies that can compete globally.
5- Leadership gaps: The lack of startups grooming new leaders and managers creates a massive leadership gap in their future. This often leads to mediocre investors giving advice to startups, resulting in an ineffective ecosystem for the long run. Lack of leadership and management skills also leads to a higher likelihood of organizational failure.
The reason behind this is that there are no clear processes or guidelines in place to help the startups grow into big companies; they are free to choose whatever they want. So, the founders try to address basic problems, but leave little room for growth, because they have no information about how bigger companies in the industry do it. Indian startups often lack relevant and valuable background experience for learning, which can be very discouraging for employees.
The reason behind this is that there are no ecosystem which provides coaching and mentorship for new-age entrepreneurs to grow into successful leaders, managers or investors. This leads to a lot of problems, including management gaps in companies once they have grown big.
6- Lack of Agility: There is a lack of agility in startups, as founders refuse to shift on to new ideas or growth strategies. Instead of investing in their business and making them bigger, founders start looking for exits to cash out and make themselves rich. This leads to the phenomenon known as “brain drain” wherein talented entrepreneurs move from one startup to another, not because they want the job but because they want money.
The reason for this is that startups in India often fail to pivot on to new ideas and growth strategies because of their culture or beliefs. This leads to “unpivotal”, or a company that is unable to alter simple tactics like hiring, marketing and business strategies, without also degrading their product line and consequently sinking themselves into permanent stagnation.
7- Business model failure: While Indian startups have been profitable for a long time, the business model of most startups is based on intermediary services like providing technology support and outsourcing. This business model has failed to grow beyond a particular point, since there is no real market fit or consumer need for it in the first place. This further creates a lack of “open-ended business models” which can serve as an inspiration for other startups who are looking to grow their company into something bigger.
8- Ineffective mentors: One reason behind a lot of problems faced by Indian startups is the lack of effective mentorship for startups to come out. Mentors who are able to overcome this issue and guide young entrepreneurs will help them grow into better leaders, managers and investors.
The reason for this is that few entrepreneurs are willing to overcome the cultural issues of mentorship and growth in India. The idea of being a leader or a mentor is not something easy to digest as leaders are often expected to work harder than everybody else while getting paid less. However, with the right momentum in place, startups can overcome these issues and help their growth by giving mentorship an explicit structure which can be replicated.
9- Copy pasting: Many of the startup journeys in India are carbon copies of the ones that existed before, with only a slight variation in names and ideas but not in the core thought. Many startups have even copied each other in terms of business model and approach.
The reason behind this is that there is no ecosystem for startups to communicate and collaborate on new ideas. There are also few events or forums where founders can get together and discuss their problems with each other. Additionally, many products like tech-based solutions, ecommerce portals etc.
10- Lack of competency: The lack of competence in startups is a common problem which exists throughout the country. However, it is not always the recruiters who are at fault for this. Most of the time, it is the hiring managers who fail to give checks and balances to startups before giving them access to critical resources like employees or money.
The above is a list of problems, which when solved would make it easier for Indian startups to grow and scale. There are various initiatives by governments, investors and entrepreneurs to make the ecosystem more conducive for all this, but as of now, there is still a lot of work to be done. The good thing is that with the growth of digital economies around the world, this issue is slowly becoming more widespread across regions.
Conclusion
As of now, the sector is still new and existing problems hinder startups to grow and scale. However, with the right amount of support, it will only take a few years for India to emerge as a startup hub that leads the world in terms of innovation and business. In fact, our country possesses a lot of skills and talents which are yet to be fully utilized in the startup sector. For instance, there is a huge pool of software professionals who are rarely employed or hired in companies, despite the fact that they have all the right qualifications. This too can be resolved soon if Indian startups and society grow as a whole.
