The theory of Indian startups

The startup story of India has fascinated everybody, starting from students to the Prime Minister of the nation. But the moment flyers are printed about entrepreneurship courses for the school going and are nicely tucked in daily newspapers, it is time for us to take a step back and understand the entire situation.

THE PAST: We all know that billions of dollars were infused in our country’s startup ecosystem, almost nearing a global outcry for massive returns from a highly populated country with English speaking citizens who fancy smartphones. We saw some heroes rising and creating stellar businesses. But there were some bad things as well.

Firstly, most of the startups were opportunistic rather than being real disruptors. Young Indians were scouting for ideas in the US that could be speedily recreated in India. Almost every other youth was consciously or unconsciously trying to emulate the Rocket Internet legacy. While some startups made relevant localizations to the foreign ideas, some did not. But overall it looked like a stampede of Indians competing with each other fiercely in the hopes of getting a multi-million dollar cheque. If one got it, one aspired for a bigger cheque. The VCs promoted it; they had their own agendas to run. So ultimately, while many companies were rationally correct in their individual standing, collectively we did unsatisfactorily.

If we look at our achievements, more than 80% of all startups remain in 3 cities. Even if we forget the collective dependency of these startups on the disposable income of the urban city dwellers, the benefits of these could not be passed beyond tier I cities. If we observe India, there are huge Bottom of Pyramid opportunities that we seem to have missed. We lived in our fantasy to cash on the ideas that originated in the West. India is different. Out of all the nations considered paragon of entrepreneurial excellence, India has the least per capita income (even after PPP), least internet penetration, least internet bandwidth, lowest life expectancy, very low quality of infrastructure and more bad things. So what do we have? India holds the promise of growth, explosive growth.

The penetration of internet growth is the highest, our literacy rate is rising and the middle income segment is fattening as we speak. So when we copy other successful ideas, we are trying to confuse absolute numbers with growth. The thing with growth is that it’s investment dependent and uncertain. So our disruption is supposed to be different from the Silicon Valley. When we hurriedly create companies that are based on successful models of the US firms, we nurture a hope to compete and that too on investor money, often assuming a perennial availability.

The technologies created in the foreign country have significant advantage because their models are not based on phenomenal labor force availability. This gives them efficiency. And when these companies enter India, they demonstrate that efficiency, which means that their survival in the game holds higher chances. But don’t we all know it now.

The theory of Indian startups

THE PRESENT: Having witnessed a bubble in 2000s, many experts have warned the investors and entrepreneurs about the possibility of a similar outcome in India. Consequently, all startups now have a single goal, to move from growth to profitability. While it is obvious that this is the right thing to do but it is far tougher than what we can imagine.

Changing a company’s strategy is not just about a change in pricing or mellowing down the discounts. It is far greater. All the business relationships need to be redefined or changed altogether. Employee mindset, company’s culture, business structure, contracts and many other things have to be changed with a focus on the minutest details. Going from growth to efficiency involves working on seven broad aspects. Starting from customer and market reach to fine tuning corporate strategy, a shift in company’s core objectives that too in a short span of time is a tough task.

Especially when all VCs seem to be working in unison and creating a scarcity of available funds that were easy to avail in the recent past. It is time for our startups to learn things from the mature companies and incorporate the best practices that make them successful. The transition is tough but is not impossible. The ones who can make this shift will be the ones who will succeed.

But in this entire episode of an artificial fiscal drought for entrepreneurs few good things have happened. Firstly the likelihood of obviating the conspicuous bubble has been increased. Startups have steered away from ‘growth only’ fallacy on time, at least so it looks like. Secondly startups are now orienting towards actual value creation and streamlining their efforts on creating sustainable businesses, which bodes well for India. Thirdly, this will create a bigger pool of domestic investors, primarily angel and series A which again is a good news for the community.

The theory of Indian startups

THE FUTURE: The future of Indian startups is bright, there’re no questions. In the realm of things happening today and that have happened in the past, the fledgling companies that can make a shift to a more operationally efficient model and generate profitability will be the ones that may emerge as leaders of tomorrow. The ones who cannot, might opt out of the game or will be absorbed by some of the stronger players. We will see some consolidation happening.

Starting from technology to operations there’s a lot of interdependency that startups have on each other, so it becomes important for few of the bigger startups to survive otherwise the whole thing may fall like a house of cards in the short term. But there’s a floating sentiment that the prudent investors will save the pivotal companies and the entire ecosystem will thrive.

Once we overcome this phase, there will be a paradigm shift in the startup culture, a shift that’s very good. We will have entrepreneurs focusing on profits, which will ultimately need them to harness the opportunities and potentials that exist in India. Accordingly, we will see innovation in agriculture, healthcare, manufacturing and education too. All these areas, as rightly envisioned by the Startup India plan of our PM, are essential for the long term growth of the country. If Startup India plan sees the light of the day, we will have the right attitude and skills imparted to the youth of the country.

Lastly and most importantly, there are further opportunities that await the entrepreneurs of tomorrow. Starting from the Digital India drive to the success of JAM (Jan Dhan Yogna, Aadhar card, Mobile) there will be myriad opportunities.

As JAM becomes successful we will have a good infrastructure to reach a much higher proportion of population, interact with them and work with them. This will open many doors. Once that happens, money will flow in while startups will be efficient and hence hopefully flourishing.

This article was originally published here

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