The Indian Startup Bandwagon

According to a recent report by NASSCOM, the IT-BPO industry body, the last fiscal year saw 800 startups enter the Indian market ecosystem. Riding on the wave of globalization and opened market access, several trained professionals are going the entrepreneurial way. As per NASSCOM’s report, according to the current growth patterns, India will house the second largest startup ecosystem after the US, in the next two years.

For a few years now, India has chosen to silently ignore the immense potential that the mushrooming startups hold for the economy. But, all of that is changing now. The Union Budget 2015 has acted as the first step by the Indian government to acknowledge this new segment of the market, by creating a special mechanism called SETU-Self Employment and Talent Utilization.

This mechanism is meant to support and nurture the startup ecosystem in India. But, it is still a very small step, given the size of the startup market and its current growth trajectory. The biggest driver of growth in the startup scene is e-commerce. 2014 was the year, when the average Indian consumer was exposed to a new frontier of shopping.  

However, the story of startups is not as rosy as it is portrayed. A startup is like any other company and requires investment and funds to function; especially in the garage phase of its existence. The US has a highly evolved and nurturing ecosystem for startups in the form of incubators and angel investors. On the other hand, India currently has just 80 angels and incubators combined. It is quite apparent that the startup to incubator ratio is dangerously low in our country.

Unlike home businesses, startups cannot run on family money for long. The Union Budget has allocated a thousand crore rupees for the promotion of startups, but, it is still meager compared to the requirement.

Some of the startups which have served as the flag bearers of the startup growth story are companies like Snapdeal, Ola cabs, CarTrade, PolicyBazar, etc. these companies have come a long way to become successful startups that offer unique services to the consumers. The rapid growth of these firms has been the driver for other entrepreneurs to dream big.

The startup ecosystem is thus divided among two categories- the haves and the have nots.  On one hand, there are successful startups like Flipkart, Snapdeal, and Ola which are managing to score multiple rounds of multi-million dollar infusions; while on the other hand there are others who are facing situations similar to a famine.

Also, the most notable startups that have sprung up and are successfully running their businesses are limited to the fields of Mobile and E-commerce. One may think that this is the case because of the immense strides going on in this sector, but that is not entirely true. The fact to blame here is that Indian startups are being funded by foreign VCs, who are currently fixated at expansions in the technology sector.

Such a scenario is very disheartening for the hard working entrepreneur, with brilliant ideas and innovations, but, no recognition and support.  SETU is a positive approach out of this mess. However, it is still a pebble in a pond.

While the government goes on calling to foreign conglomerates to Make in India, their first step should rather have been to promote an internal growth ecosystem. The number of new startups is going to keep on growing, as young graduates and professionals ride the entrepreneurial wave to self employment. So, instead of creating new sets of regulations to bog them down, the GoI should instead create support groups and organizations which identify and aid potentially unique and valuable startups.

The road ahead is quite long for Indian startups. The coming year will see many more startups mushrooming all over the country, with new and unique products and enthusiastic entrepreneurs at their helm to guide them to glory. Several more steps are also expected from the government which will help reduce the turbulent divide between the top 5 percent of startups and the rest of the 95 percent.