India is one of the most vibrant startup ecosystems in the world. And it’s the most complex, too. Opportunities are boundless as the country has the second largest mobile market — at around 900 million — in the world, of which smartphones account for 200 million. The time is ripe for investors, who now have all the right elements to invest their money in India. They have already started pouring billions of dollars into the country and the investment is going up further. This renewed sense of optimism is also encouraging more employees to plunge into entrepreneurship — and talented Indians are not afraid of failure any more.
Experts believe that India is not too far away from toppling the Silicon Valleys of the world to become the prime startup destination. This is evident from the recent spurt in volumes in VC deals and M&A activities. Besides, the sizes of funding deals have also gone up.
But what makes India so vibrant? Here we bring you a list of five reasons that make it one of the most sought-after startup destinations in the world.
1. India is the largest remaining under-penetrated market
It may sound a bit weird, but India, despite being the second fastest-growing economy in the world, is still under-penetrated. Of the 1.3 billion population, more than 50 per cent still don’t have access to the Internet or smartphones. The majority of startups operating here — domestic as well as foreign ones — are catering only to the smartphone (or the middle-class) population. About two-thirds of people are still living in rural India. Although a handful of entrepreneurs are working for the upliftment of the bottom of the pyramid (BoP) by offering cost-effective irrigation, micro-financing, learning and transportation solutions, it is not enough. More social enterprises need to come forward with affordable solutions that can bring in inclusive growth.
However, experts feel that it is just a matter of familiarity before entrepreneurs come out with smart solutions targetting the lower section of the society. “A majority of startup entrepreneurs are living and operating in major cities such as Bangalore, Mumbai and Delhi. So they know how urban India thinks and their tastes and these entrepreneurs devise their strategies and develop their product accordingly. Entrepreneurs are not so familiar with rural India as they still remain inaccessible. Hence this gap. But I feel more people will come to plug this gap,” says Ajith Mohan, Founder, Furlenco, an online furniture subscription startup.
2. The only true mobile-first economy
India bypassed the personal computer revolution and moved straight to mobile. There are many reasons behind this. The availability of numerous brands triggered a price war here, prompting people to buy smartphones and shun their PCs. With the cost of network access and handsets going down and wireless networks going up, Indian consumers have started accessing digital services via mobile. This has actually helped various service providers to sidestep a host of hurdles associated with delivering affordable Internet services to a population that is geographically dispersed and relatively poor.
Many Internet companies are now going mobile-only. For instance, leading fashion e-tailer Myntra recently shut down its website and has gone mobile-only, as over 90 per cent of its sales are coming from there. Other e-commerce companies are also imitating this strategy. What is more, budding entrepreneurs are now creating products keeping in mind the mobile-only population. India is a high-volume game where smartphone penetration is shooting up.
“Smartphone penetration has really changed the Indian startup landscape. Lot of businesses that are very niche have now become mass market products (for example, banking) with the proliferation of the smartphone,” says Sanjay Swamy, Partner at early-stage VC fund AngelPrime.
3. The largest multi-language market
India is home to a huge variety of languages. As per a 2013 survey , India speaks around 780 languages. Although the country has the largest English-speaking population in the world (around 80 million), the existence of multiple languages offer massive opportunities for startups and investors.
Most phones sold in India come with an English-language operating system software. However, brands like Xiaomi recently launched multi-language smartphones. This is a good move as far as startups are concerned, as they can now tweak their solutions or launch new products in order to cater to the large non-English speaking population.
“The mobile-first smartphone has already penetrated beyond the English-speaking population which accounts for only 80 million. The opportunity for vernacular-based solutions is going to skyrocket now,” says Swamy.
4. Higher salaries at startups than at large enterprises
Till a couple of years ago, it was the ‘monopoly’ of multi-national companies such as Microsoft and Google to hire graduates from premier educational institutions such as IITs and IIMs. This scenario has changed. Now, with multi-billion dollars in pockets, growth-stage and late-stage startup companies are making a beeline to rope in IIT and IIM graduates, offering plump salaries.
“Companies like Flipkart and Snapdeal have raised billions of dollars in funding and so they are able to offer very big salaries to people. There is no longer the perception that only big enterprises can afford to pay fat salaries. Indeed, many executives in startups are working for higher than market salaries. The best-paying jobs in the country are early-stage companies or late-stage startups,” adds Swamy.
More over, these startups also offer employee stock options to employees. This prompts people to choose startups to work for over large enterprises.
5. Lack of easy availability of seed capital
Although India is home to many large VC funds, there are not many early-stage funds who are willing to invest their time and money in early-stage startups. Young startups — barring those started by IIT and IIM graduates — often find it hard to get early-stage funds.These issues are now being addressed by large VCs, who have launched exclusive early-stage funds. Foreign funds have also started believing in India’s potential (for instance, Japanese fund Rebright Partners recently launched an India-focussed fund). However, this is not sufficient. More foreign and domestic funds should come forward to aid early-stage ventures.
“If you are an entrepreneur, especially a first-time entrepreneur, looking for some mentorship as well, you will need to look for investors who are willing to invest their time and money in your business. And these wouldn’t be your big VC firms you often hear of in the newspapers,” states Kaushal Dugar, Founder of Teabox, an Accel-backed tea e-tailer.
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