Sunday, March 19, 2023
HomeCampus VoiceIndian start-ups delusional about their economic aspects? Need of a research oriented...

Indian start-ups delusional about their economic aspects? Need of a research oriented ecosystem

Campus Voice is an initiative by ThePrint where young Indians get an opportunity to express their opinions on a prevalent issue.

Text Size:

In recent times, when reading international media coverage of India, the growing start-up ecosystem with over 105 unicorns has been mentioned repeatedly. Given the relatively small size of the economy and the usual barriers of any third world country, the success is, of course, phenomenal. This achievement was made possible by easily accessible internet connectivity to the most remote areas, UPI infrastructure, and the relaxation of start-up rules and regulations. The government actively promotes the ‘success story of Indian start-up’. It has almost become a talk at the dinner table of any middle-class metropolitan family.

Amongst this excessive optimism, the news of an ed-tech giant (which is also sponsoring FIFA World Cup 2022) firing 2,500 of its employees did come as a shocker to everyone. We need to put things into context regarding growth opportunities, employment, and overall impact of India’s start-up world. The reason we have had jobless growth since 2000 ist that wealth was created in the IT-service economy, which was less labour intensive with white collar jobs concentrated mostly in IT hub cities. 

Unless India develops domestic manufacturing capacity, it will not be able to achieve the consistent job creation and high growth that successful Southeast Asian countries have. A cursory look at India’s start-up scene will disappoint anyone because the majority of them are e-commerce, fin-tech, and consumer service providers that primarily serve the urban middle-class customer base. The best example to simplify the importance of manufacturing is – a cup is made once but washed over a thousand times. That is, a thriving industrial base is required for the service sector to function. Broadly, the Indian start-up story has the following major flaws:

Also read: Bangalore today is like a shy kid forced to be an extrovert

Business model 

Majority of these start-up firms have been making huge losses even after years of their founding. People would raise their eyebrows if a start-up made a profit at the end of year. The e-commerce of venture capital-based discounting goods and services is not a reliable model. Unfortunately, a majority of our start-up success falls under this category, where the valuation is the main objective and not revenue models. The historical stock crashes of start-up valuations after the IPO round have exposed the absurd business models.

Lack of ingenuity

A common criticism levelled at Chinese start-ups was that they were carbon copies of American companies. This is also true for Indian start-ups, which have blindly applied business models that have worked in the West to the Indian market. It’s also true that because these companies are in the service and e-commerce industries, they don’t have much room for R&D.

Financing and seed funding 

The founder’s main focus remains valuation and getting off their company at the earliest. The plan to sell their stake rather than have skin in the game to create a solid revenue model distorts start-up financing. If you go through the shareholding pattern of these unicorns you would find that a good number of them are in fact owned majorly by the US or China based VCs which is definitely a bloat on atmanirbharta (self-reliance). The main reason for this is Indian investors’ conservative attitude towards start-ups, as even after having the world’s IT giants, none of them optimised by capitalising tech start-ups with their surplus cashflow.

Areas unventured 

Despite news headlines about space start-ups, vegan start-ups, and FinTech providing credit to remote marginalised communities, there is still a large space that the start-up ecosystem has not even considered. Even the green and innovative start-ups haven’t been as successful in their scale as their ‘mainstream’ peers. India as a country has myriads of problems that need the young, innovative and ambitious brains to work upon. Take social entrepreneurship as one such untouched area. India, being a country with caste, gender and economic inequities, has a lot to work on in its human development. With such a high number of STEM graduates, we do lack hard engineering start-ups that innovate machines and perform R&D.

More than 60 per cent of Indians are engaged in the agriculture sector and there’s scope for agro-startups in terms of food processing, use of AI, robotics and web 3.0 in storage and logistics of agricultural produce. For a country with so many programmers, Indian start-ups haven’t accomplished much in AI and machine learning. With the advancement of blockchain technology, there’s a large potential for decentralised blockchain to strengthen communities and civil society.

India’s demographic dividend can turn into a nightmare if the future business leaders don’t change their course to a research oriented and manufacturing start-up ecosystem.

The author is a student at Christ University, Bangalore. Views are personal.

Subscribe to our channels on YouTube & Telegram

Support Our Journalism

India needs fair, non-hyphenated and questioning journalism, packed with on-ground reporting. ThePrint – with exceptional reporters, columnists and editors – is doing just that.

Sustaining this needs support from wonderful readers like you.

Whether you live in India or overseas, you can take a paid subscription by clicking here.

Support Our Journalism

Most Popular