Innovation Key To Startup Success In India: Study
India’s startup community is expanding rapidly with a strong entrepreneurial culture, especially among millennials. Strong government promotion of entrepreneurship has also strengthened a rapidly evolving startup culture.
According to a survey done by IBM in collaboration with Oxford Economics, startups can exploit a range of attributes and advantages unique to India. More than 76 percent of Indian executives pointed to India’s economic openness as a major business advantage, while 60 percent identified India’s skilled workforce and 57 percent of the executives said that India’s large domestic market provides significant advantages.
“Startups are redefining the Indian economy by being the catalysts for technology innovation and collaboration. The Indian startup community; ranked third globally in terms of number of startups has been creating new job opportunities and attracting capital investment. We believe that startups need to focus on societal problems like healthcare, sanitation, education, transportation, alternate energy management and others, which would help deal with the issues that India and the world face. These require investments in deep technology and products which are built to scale globally,” said Nipun Mehrotra, Chief Digital Officer, IBM India-South Asia.
He further added, “At IBM, we work closely with startups, VCs, incubators, academia, and individual developers to foster a culture of innovation and disruption and provide access to deep technology such as cognitive, blockchain, cloud and other emerging technologies, as well as the business mentoring needed for their growth.”
A proposed reduction in corporate tax from 30 percent to 25 percent is expected to further boost startup activity. The study further stated that market valuation of Indian startups has grown significantly over the past four years, with three times increase in startup investment recorded in 2015. According to the study, approximately 35 percent of startups are being set up in tier two and tier three cities, thereby promoting accelerated development and industrialization of rural and other less developed areas.
Top roadblocks for India’s startups
Despite India’s entrepreneurial strength, the startup economy still has not reached full maturity and more than 90 percent of startups fail within the first five years.
- Lack of innovation: 77 percent of venture capitalists surveyed believe that many Indian startups lack pioneering innovation based on new technologies or unique business models. Indian startups are prone to emulate already successful global ideas.
- Lack of skilled workforce: 70 percent of the venture capitalists believe that talent acquisition is one of the biggest challenges faced by Indian startups, and limited availability of necessary skills impedes growth. As per a study, 80 percent of engineering graduates in India are deemed unemployable and 48 percent of employers in India face difficulty in filling vacancies.
- Lack of sufficient funding: Indian startups face funding roadblocks both at entry and exit stages while successful global startup ecosystems are well supported by active investor communities. 65 percent of venture capitalists revealed that funding is one of the major challenges for these companies.
Other roadblocks include inadequate formal mentoring, poor business ethics and lack of experienced leadership.
The IBM study, “Entrepreneurial India” is based on interviews with more than 1,300 Indian executives, including 600 startup entrepreneurs, 100 venture capitalists, 100 government leaders, 500 leaders of established companies and 22 educational institution leaders to analyze the macro impact of startups on the economic growth of the country.
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