Biggest challenge in India is to get early-stage funding: Rajat Tandon
Rajat Tandon, Senior Director, NASSCOM 10,000 Startups discusses the challenges faced by startups in India and the steps taken to abate themBy Twishy Shahi 08 Jul, 2014
Startups in India have disruptive ideas, but they die before they are born. Why is it so? Is the environment not conducive for entrepreneurs? Why is it so difficult to get early-stage funding? Where should they look for it? How should they find the right mentors? These questions haunt every budding entrepreneur in India and they prefer to become slaves of corporate giants rather than giving shape to their dreams.
To help combat this and foster the startup ecosystem in the country, National Association of Software and Services Companies (NASSCOM) launched the 10,000 Startup initiative in 2013 aimed at incubating, funding and supporting 10,000 technology startups in India over the next 10 years.
The first two phases attracted 7,000 applications, of which 529 were shortlisted and over 125 benefitted by way of receiving funding, acceleration, mentoring, co-working space, enterprise connects and showcase opportunities through the programme.
In this exclusive interview with e27, Rajat Tandon, Senior Director, NASSCOM 10,000 Startups talks about challenges of early-stage funding in India, lack of women entrepreneurs, the 10,000 initiative and more…
How is NASSCOM 10,000 Startups facilitating better ecosystem for entrepreneurs in India?
Entrepreneurship in India is still towards the traditional side of business, so we thought of an initiative, which aims at incubating, funding and supporting 10,000 startups in India over the next 10 years and building India as one of the world’s most vibrant ecosystems in technology innovation.
We do not want the young guns to fear failure, instead we want to take their ideas to the next level through great mentorship and enterprise connects. Hence, in 2013, we launched the 10,000 Startups to support entrepreneurship and help the startups whether they are in the ideation phase or building a product or looking for customers and funds.
What were the lessons learnt from the first year of operation?
We have run two phases and recently launched the third phase after a huge success. In the first round, we had 4,000 applications in 45 days as opposed to 3,000 applications in just three weeks in the second round. Some of the interesting findings are that the maximum number of startups are coming from Bangalore followed by Delhi/NCR and the West. There is an immense response from tier 2-3 cities as well.
We saw very low participation from women with only 4-6 per cent of the applications coming from them. A majority of the applications were offline, and education, health and e-commerce were the top-end areas for startups. However, the Internet of Things (IoT) and Big Data space were in demand from the accelerators. There is a bit of gap in these areas and we are trying to bridge them through this initiative.
Among the applications, 40-43 per cent were in the ideation stage and our aim is to take the ideation stage startups to the next level. To address this issue, we went viral on doing hackathons across India for the startups to meet the right set of people.
With the launch of the third phase, NASSCOM will take forward the learning from its experience in the last one year and will focus on evangelising and creating a robust ecosystem around specific domain and technology segments. The programme will invite domain centric applications and plans to launch app-based contests.
Tell us about some of the innovative programmes started by NASSCOM 10,000 Startups.
Our focus has been on early-stage startups and we want to promote a culture where the growth-stage startups can help the early-stage startups. We have noticed that most of the early-stage startups are bootstrapped, but they lack industry connects. Hence, we did the Enterprise Connect and made it more focussed on different industry segments such as education, health, retail, HR and admin because we realised that one solution doesn’t fit all.
The 10,000 Startups programme selected 27 emerging and early-stage product startups for NASSCOM InnoTrek, which was the first-of-its-kind delegation that travelled to Silicon Valley to showcase some of India’s most promising tech startups that are addressing a global market and provide these future leaders with the opportunity to interact with global giants.
After the success of InnoTrek 2014, NASSCOM now plans to undertake more overseas startup delegations to Israel, Singapore, Hong Kong and parts of Europe and showcase India’s most innovative tech startups building world-class products. A special focus will also be put on the NASSCOM-Google ‘Girls in Tech’ programme to increase the representation of women founders in tech startups in the country.
What are the kind of startups that apply for the programme?
A majority of them are early-stage startups. Close to 25-27 per cent of the companies already had prototypes, another 20 per cent had customers, 10-12 per cent were revenue staged and 40 per cent were just ideation stage. Our focus is to move step by step where firstly the prototype companies should get customers.
The biggest challenge in the country is to get early-stage funding. It is easier to raise INR 1 crore than raising a small amount of INR 1 lakh in India.
What kind of partners support the programme?
We have close to 18 accelerator partners and 12 angel partners such as TLabs, Microsoft Ventures, Investopad, Ryerson to name a few and we have angel partners including Mumbai angels and Hyderabad angels. Indian Angel Network (IAN), the country’s first and largest angel investor network, has joined hands with Nasscom to invest in early-stage ventures emerging from the 10,000 Startups programme.
IAN had previously looked at much more mature companies, but it has started seeing quality startups emerging from the 10,000 Startups initiative. It is looking to fund up to eight startups over the next six to eight months that will be identified by the members of both bodies.
How do you screen the best applications?
The initial round of filtration is done by us and then our angel and incubator partners rate them on a scale of 1 to 4. The shortlisted companies do a final pitch in front of all the partners.
We would soon be moving to a platform that is completely accessible online and one can see the updated applications running on that. People will also be able to search and rate any of the different types of applications.
What do you have to say about the quality of incubators and accelerators in India?
The quality and number of incubators and accelerators is below par in India, though there are good ideas coming out of them. It is essential to have more focussed incubators such as the Pitney Bowes programme that is focused at location-based services startups only.
What is the difference between the startup ecosystem in India and Silicon Valley?
There are a lot of people to support early-stage startups in Silicon Valley, and there is a complete ecosystem where the growth-stage startups help the early-stage startups. Crowdfunding is helping boost entrepreneurship in the Valley.
The policy in India should look at enabling crowdfunding and micro-funding for early-stage startups. We should study the successful stories from the West and also learn from the funding scenario for early-stage startups in countries such as Singapore and Israel.
How is the SEA market conducive to the startup environment?
There are sufficient funds and support from the government side for even the early-stage startups as opposed to India. There are brilliant ideas running in the country, but there is a lack of support. Look at our initiative in which out of the 500 selected applications, only 150 have been impacted but what about the other 350? Are they not capable?
It is always said that in India, revenues sell and not ideas. How can we change this?
Ideas should be put across as products. Ideas are present everywhere and there is nothing unique about an idea unless there is a prototype behind it. There is a need to take that idea to the next level.
Why is the Indian market attracted to the West in terms of funding?
One of the key things is the social factor. The startup ecosystem is much more developed in the West. In the East, failures are still considered bad. The whole objective after getting out of college is to work for an MNC and nobody wants to take their idea to the next level. The colleges have to think about nurturing ideas and dreams into a prototype model.
Which sector is attracting the maximum investments in India?
E-commerce is hot followed by analytics and Big Data.
What are your expansion plans?
We want to create more hubs in the country rather than just Bangalore and Delhi. Our plan is to expand to tier-2 and tier-3 cities also.
How are you ensuring that the new government policies are supportive of this ecosystem?
We regularly engage with the government on policies. Our President has proposed the challenges, requirements and possible changes in the policy to be brought about by the new government. Recently, NASSCOM Executive Council met with the Union Government and has put forth its recommendation to launch US$83 million Indian technology entrepreneurship mission (ITEM) to foster an ecosystem and initiatives that accelerate growth of product, small and startup companies in the technology space.
At a global level, NASSCOM suggests to establish launch pad facilities for early-stage India domiciled technology ventures that wish to crack into international markets. It plans to set up the first batch of technology venture launchpads in the US (San Francisco, Silicon Valley, NYC), Europe/UK (London), Singapore and Japan. These facilities will provide access to low-cost office space for upto a year, connect companies to local talent, investors, customers, press, service providers, assist with visas, recommend pre-packaged cost-efficient legal and accounting services, and actively look to showcase the companies to the local ecosystem.