The Indian startup ecosystem will mature. But at Indian Standard Time.

10th May 2013
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Read media reports about India, and you can’t help thinking that while India is incredible, it is also incorrigible.

One hears of huge opportunities in India. One of the youngest nations in the world. Tremendous appetite for technology and solutions that improve life. One of the few large markets that is growing. The Internet and Mobile Association of India (IAMAI) expects over 165 million mobile internet users by 2015.

And one hears of hurdles. Bureaucratic tangles to opening businesses. Strong regulations about foreign investments. A nascent startup ecosystem where exit patterns aren’t established.

Deciphering India is tough.

If you’re a global business looking to step in and invest in the Indian market, none of your conventional checklists may help. Compared to other markets, India can seem chaotic. You simultaneously sense immense possibility in the market, and a sense of wonder of how things run here. You can run your numbers multiple times, but you may have to add a dollop of faith that things will work out as planned.

Indian family on a scooter that occasionally needs a kick, like the Indian startup ecosystem
The Indian scooter was a vehicle for the masses. It carried an entire family, but often needed a tilt and kick to start.

Compared to the organized processes of the West, India has always found a way to work in chaos. An apt analogy would be the veritable India scooter, a two-wheeler that was the primary vehicle for Indians twenty-five years ago. It seemed as if it were designed to carry a family of four - the father riding it, mother on the rear seat with a kid stuck on her lap, and another (usually elder) kid standing at the front of the vehicle. Though it was sturdy and got the job done, there were many times it wouldn’t start. The driver then had to get off, tilt it to the side and then kick-start it, after which it gave no problem during the ride.

The Indian startup ecosystem just needs the tilt and kickstart for it to zoom ahead. And: that’s likely to happen soon.

Let’s look at the landscape today.

50% of India’s billion-plus population below 25, and 66% below 35. By 2020, the average Indian will be 29 years old, compared to 37 for China and 48 for Japan; and India's dependency ratio should be just over 0.4 even by 2030.

Unlike the West, consumers will get using online mobile first. Large scale LTE deployment is expected next year, which will bring over 165 million people online for the first time over the next couple of years. Many of the first time users will use services from Google, Facebook and other internet giants, but there will be huge opportunities to satisfy local needs and aspirations.

Though GDP growth has slowed down over the last few years, it is still at over 5%.

Companies like Flipkart have shown that it is not enough to just pick a business model that works elsewhere. The model has to be customized for it to work in India. While Flipkart started on the Amazon model, a key differentiator was the option to pay by cash on delivery of the product. This enabled many who did not own credit cards to use online services. All other e-commerce sites today follow the same model.

Firms like inMobi and MuSigma have built global products sitting out of India that command sizeable valuations and investments. Starting in India confers the advantage of lower costs of operation, highly qualified skill sets, and more importantly, a better understanding of how emerging markets work. Given that many emerging markets are in a similar stage of mobile evolution, it’s likely that solutions built in India have as good, or even better, a chance at cracking these markets than those built in the West.

Many young companies have taken notice of the opportunities.

Despite the complexities of starting business in India, aspirations run extremely high. Over the past few years, there have been over 10000 startups in India, with over 8000 new entities expected to startup every year. NASSCOM recently launched a high profile initiative called ‘10000 startups’ aimed at providing support for the nascent startup ecosystem.

In a Yourstory State of Startup survey report, most startups rated prospects as extremely bright over the next 5 years, and over 60% of them expected to double business this year.

Startups attracted over $735 million of funding in 2012, and over the next five years, investment estimates are at about $8-12 billion.

But there’s still a long way to go. The expected failure rate is also higher in India. While about 50% of startups succeed in the Silicon Valley, the number in India is about 25%. A lot of this has to do with the fact that the Indian ecosystem is still learning.

Yourstory.in has been an early chronicler and catalyst of the Indian Startup ecosystem. In all these years, we see signs of rapidly growing maturity in support for startups, be it in the number of accelerator networks, funding for interesting projects and teams, availability of a world-class talent pool and a strong ambition to rub shoulders with the best of the world. At one end, we see youngsters out of college hungry for success starting companies with tons of enthusiasm. At the other, there are companies with professionals seasoned at global firms who have quit well-paying jobs to start entrepreneurial ventures based on the skills they have built along the years.

The Indian ecosystem is still taking early steps along the arc of building unique global products. But give the Indian innovation engine a few years, and we will see many interesting business solutions and products emerge from India.

The ride may not be smooth, but we’ll get there eventually. For all those wondering about when that will be, just remember that we work on Indian Standard Time.

Source for numbers related to startup ecosystem: YourStory Research

 

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