India: Technology Start-Ups in Emerging Markets

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Challenges

Although the industry is ripe with opportunity there are still numerous challenges that must be dealt with. In India, very few are ready to give up the comfort and security provided by their cushy jobs to become entrepreneurs. Hence, it becomes difficult for startups to attract and retain quality talent – since people generally do not want to quit their jobs at larger companies to go and work for a startup.

India is still lacking in a proper startup ecosystem to take full advantage of the opportunities up for grabs today. Other than a limited number of top business schools in the country, most educational institutions fail to provide the necessary support and resources for their students to indulge in free-form thinking, and take up entrepreneurship.

Lack of funding is one of the major issues being faced by startups in India today. Add to that the lack of government support, in terms of policy approvals, bureaucratic red-tape, and slow decisions by committee mentality – this poses a big challenge for Indian startups. While a lot of capital is being injected to this industry it is usually late stage startups that are given funding. Startups in early development are generally strapped for cash. One company that sought to alleviate the situation was seed fund, although they have helped a lot of startups they have yet to remedy the situation in a broader scope.

Most Indian startups lack the long-term vision and leadership to sustain and grow their business over the long run; too much emphasis is given on quick monetary returns instead of innovation – a situation that is not helped by the VCs/angel investors for these startups, either.

Infrastructure: The infrastructure in India leaves much to be desired – poorly planned roads, inefficient logistics, quality of Internet service, issues when it comes to water and electricity, among others, all contribute adversely to the startup ecosystem in India today.

Indian startups, compared to their peers in other startup hubs, are generally reluctant in paying their employees in terms of industry standards; they usually blame the economy/recession as a part of these “cost-cutting measures”, while on the other hand, the employees are overworked and underappreciated. This results in substandard performance by the employees, and in turn, the company as a whole.

The startup ecosystem in India faces a serious dearth of good mentoring and a support system – India does not have a large pool of successful entrepreneurs who have built successful companies from scratch, and are willing to mentor the next generation of entrepreneurs. A lot of entrepreneurs are looking for good mentors – as opposed to funding.

India as a Tech Hub

In recent years, technology companies in India have generated growth, creative jobs, education, and healthcare, resulting in lower poverty levels and an improved quality of life for millions of people who never in the past thought it was possible.

According to a report by NASSCOM, India has been ranked the third largest tech startup ecosystem in the world, coming after the United States and United Kingdom. Their ecosystem consists of more than a 100 accelerator, 200 active angels, 150 venture capitalists and just over 4,500 startups operating in the country. Year by year, India is continuing to be the forefront of all innovations, technology and entrepreneurships. Due to the growth of this industry in Inida, the country has seen several improvements such as:

- Increasing connectivity and consumer purchasing power

- Home to the young and vibrant startup scene

- Increasing amounts of investments and mergers and acquisitions

Entrepreneurial Ecosystem

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For any startup to grow and be sustainably, there must be a laid out system to support and encourage entrepreneurial and innovative efforts. Professor Daniel Isenberg from Babson college, published an article in the Harvard Business Review to explain and bring more awareness to the concept so other emerging markets around the world could benefit from it and learn how to implement it by not imitating what other developed countries are doing.

In this article, Isenberg outlined several prescriptions on how to create such ecosystem:

- Emerging markets should stop trying to replicate Silicon Valley. Although it was seen to be extremely successful in the United States, it is going to be nearly impossible for it to succeed. Instead of trying to replicate Silicon Valley, the ecosystem should be built based on local conditions and needs. Governments and other companies should expand their existing industries and build on their foundations, capabilities, and skills rather than launching a high-tech industry from nothing.

- As important as it is for the government to step up, there is also the importance of engaging the private sector for the beginning. In this situation, the government plays the role of a facilitator not a manager. In the attempt to shape the growth of the ecosystem, the attention should be given to companies who have high potential and where local business owners from being a success story to a role model for other aspiring entrepreneurs.

Role of Governments in Sustaining the Entrepreneurial Ecosystem

In the past several years, governments have taken it upon themselves to stimulate their economies, create jobs and generate income for those who need it via the applications of entrepreneurship and innovation. This sort of approach has also been a common theme in the past by developed countries and now, the governments in emerging markets are following this theme in government policies. The background of this form of governmental policies goes back to the 1979, when Professor David Birch of MIT, published a study named “The Job Generation Process” where its key findings stated that the work in general was not being generated by large corporations but rather by small independently owned businesses. Also, in Birch’s report, he recommends that government policies surrounding entrepreneurship should target indirect rather direct strategies with a greater focus on the role of small business.

By governments taking such interest in helping the entrepreneurial ecosystem, it opened opportunities for new fields of technology and academic study and research innovation. This change in perception also lead to the most recent iconic trend which is “technopreneurs.”