An Undefined Case in Indian Start-ups: Nascent Stage to Zombies

“Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do.” – Steve Jobs, Apple Inc. co-founder, chairman and CEO

Technology start-ups have been emerging rapidly over the last few years in the global market. Of late, India has been the third largest place for start-up innovation. Well, one needs to compliment investors and venture capitalists for the major contribution towards the development for their consistent bulk funds that has been driving most these organisations over a last decade.

Notwithstanding the fact that market valuation of the Indian start-ups has grown significantly over past few years, a recent study by IBM, “Entrepreneurial India” found that 90% start-ups fail within the first five years and 77% of the venture capitalists believe that Indian start-ups lack technologies and unique business models. Where in, some start-ups succeed that capture the qualities such as vision, determination, social and fundraising skills, adaptive to changes, etc. which keeps them driving upwards in the market.

Why Fail?

According to Forbes, Since 2015, more than 1500 start-ups have shutdown in India and as per Tracxn, a research partner for venture capitalists & corporate development offices, more than 11,000 start-ups went dead-pooled or zombies due to lack of raising funds or went off track of runway.
Following are the key reasons for start-ups ceased or experienced a failure:

Absence of Vision

A well-defined or crisp vision is a skill or finesse that any company leader needs to draw in order to keep the business in a right flow. The most vital part of start-ups is to envision how to monetize every single activity or belonging. It is not the ‘money’ but the ‘passion’ that drives entrepreneur’s vision towards success and will serve as a compass at tough times.

Inadequate Mentorship or Guidance

According to Grant Thornton report, most founders of failed start-ups feel that the lack of guidance and mentorship in terms of industry knowledge and support is a major reason behind their failure. Every business needs help to grow, Advisory board will get the expertise and mentoring towards determining business area of need and keep the overall stuff in structure.

Financial Constraints

A successful start-up is efficient in managing its finances and able to operate very lean. But the one among major reason for failure is when the resources are limited and time is the essence, most of companies look at climbing the higher ladder at the earliest to achieve highest revenue which leads to utmost loss of funds and hence the firms exhaust their resources quickly and leads to doom. At this point, companies need to master the skill of doing more with less.

Social Skills

Networking is another reason for start-ups success. A founder or leader should always be in a dedicated network in and around the domain or industry. Most of the start-up founders turn to be introvert and keep themselves away from meeting people. Great start-ups have outstanding leaders because they love to talk and inspire people by sharing the thoughts and journey they have seen to build an empire! Such attitude not only leads to growth in business but also opens up doors for partnerships or to find investors.

Innovation and filing patents

Though initiatives taken by Government of India such as ‘Make in India’, ‘Start-up India Program’, etc. may have stimulated growth, but it’s no secret that innovation is a piece which still remains missing in the Indian Start-up ecosystem. The hard part is that India has been follower market – what we see in US and China today will start appearing in India tomorrow. As per the Global Innovation Index, currently India stands at 60th rank, which is 38 places behind China. Undoubtedly, India has top class talent, high market potential and global business skills one needs to start investing in R&D which helps in establishing links between the current social problems, technology & innovation.

Indeed, patent is the yardstick for innovation, India is miles behind Asian counterparts. According to World Intellectual Property Organisation, in 2016-2017 India has filed 9584 international patents, China has filed 48,882 international patents, and Japan has filed 48,208 patents. Emphasizing Innovation on social needs or issues faced by India leads to consistent business growth, sustainability and ultimately addressing towards significant changes in the common man needs.

“Don’t worry about failure; you only have to be right once.” – Drew Houston, Dropbox Co-Founder and CEO

In India, many new ventures do not succeed because the technology start-ups are very complex. There are several interconnected factors that could play a part in start-up failure such as founder characteristics, business & technical roadmap, practices and behaviour after start-up. Successful start-ups spend more time in planning, advises from professionals, customers, suppliers to understand the market needs before developing product or rendering services.

In general, more studies of the start-up development process needs to be identified by creating groundwork for more successful and increased success rates for technology & innovation start-ups. This will provide economic benefits and accelerate the development of solutions to societal needs and issues.