Indian Startups – Nuts and bolts – The Times of India Blog

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Dr. Agyeya Tripathi has completed his Ph.D. and holds a Masters degree in Business Administration and another Masters in Electronics and Communication. He is a national resource person for Financial Inclusion under National Rural Livelihood Mission, Ministry of Rural Development, Government of India. LESS … MORE
Indian start-ups are playing a significant role in economic growth of the country. These startups are utilizing technology to bring in transparency for customers as well as for investors and other stakeholders. Other than generating employment these institutions are leveraging available resources for operational and financial optimization. Due to this very fact, start-ups are getting support from government. India has the third-largest ecosystem for startups, but research reveals that more than 70% startups fail to generate positive returns on investments around 21.5% of start-ups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% in their 10th year.
Nearly 80% of venture capitalists feel Indian start-ups lack unique business models, as most of them simply copy successfully established business models without putting unique local insights into it. But, only lack of uniqueness cannot be taken as scapegoat for failure of all start-ups. There are many other considerable reasons for these failures.  
Lack of Passion and Agility – Starting up of new business comes with so many responsibilities and unpredictable challenges. It increases working hours of founders and disturb their work life balance. This burn out is essential to build a strong and successful company, but many founders find unprepared for this and gradually lose passion towards their business and its functions. 
Lack of Innovation – Surveys revealed that almost three-fourth venture capitalists agree upon lack of innovativeness in Indian startups. Study led by a renowned training institute for business value showed that 91% Indian startups get shut down because of lack of innovation in their approach.
Insufficient Funds – Turning an idea into business needs funds, insufficient capital is also one of the major reasons of Start-ups failure. Having said so, fund utilization is also a cause of concern. Various startups have successfully received seed funding from available sources, but they either failed to utilize it properly or found incapable of proving a profit making business model. 
Indefiniteness – It is very much important for businesses in start-up phase to keep focus on primary functions important for the success of business. Over enthusiasm and non-availability of human resources in the beginning lead to overburdened team members and finally results in failure. Bangalore based app development company, started to offer web and mobile application development and marketing services to other businesses, got failed due to launch of too many products without focusing on what was the exact requirement of client. 
Unfit product – Many startups do not focus or invest much on market survey and value proposition of their customers. Without proper understanding of market, startups end up with product/service offerings having less value for customers. One of the Subscription based milk delivery start up entered in market with service of home delivery of milk, groceries, dairy products and other essentials. Despite of having sufficient funding and visionary founders, company failed to take off because it did not have any differentiating value for customers over other market players.  
Leadership – Founder of startup may have a great idea, but converting that idea into vision and then operationalizing the same is critical but important in medium to long term. It has been found that founders of business are good at technical understanding about the product or services they want to offer, but lacks in business management skill, which in most of the cases prove to be suicidal for most of the startups. 
Inefficient Employees – Studies have shown that one-fourth of startups have failed due to inefficient and incompetent human resource. Hiring right talent is very essential as startups do not have time and money cushion to replace the hire with better one. Many a times management team make mistake in assessing required numbers of employees, estimating more or less numbers of people also fatal. One of the food tech start-up in India failed because of excess hiring of delivery boys than actual requirement. 
Legal Challenges – Following the laws of land is very much essential for startups. In case of ignorance towards any implied law may result in great loss for business. Few fintech companies in India with good and innovative business models were forced to shut down their operations as RBI’s regulation for virtual currency didn’t allow their operational compliance under Indian financial system.
Apart from these major roadblocks startups may face other challenges including team coordination, pricing issues, timing of product launch, product localization etc. Conducting proper market research and developing foolproof business model is extremely essential for these enterprises, but limited funding and non-availability of proof of concept make things difficult. Although risk factor of business cannot be eliminated completely but applying founder’s agility in right direction, avoiding with the mistakes of failed business models and adapting to learnings of successful models help in building a roadmap to success and sustainability. 
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Views expressed above are the author’s own.
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