Start-ups script the saga of success for a thriving economy. In today’s world, they are the new avenues for creating significant wealth, while simultaneously generating sizeable employment in the quickest possible time.
Indian start-ups are deploying different business models, converging market acumen with technological expertise. Some start-ups operate on the new service delivery model, directly catering to users at large. Others target niche technology areas, such as new medical devices, algorithms for improving diesel engine efficiency, design and fabrication of small satellites, and so on.
For a majority of youth, the greatest satisfaction is seeing their ideas gain wider acceptance and shape into fruition. Thus, start-ups in the recent past have emerged as the number one career option for many graduates from leading schools of business and technology.
The success of start-ups depends on a complete innovation and financing ecosystem, comprising incubators providing appropriate technology and hardware systems, effective mentoring, access to easy finance, assistance in the marketing of products and services, etc. Such vibrant ecosystems have played crucial roles for creating startup havens in Silicon Valley, Cambridge (UK), Tel Aviv, and also in our own Bengaluru.
In order to leverage our 1.30 billion minds, we need myriad start-ups spawning from a multitude of ideas for every conceivable service, application or social benefit. The Prime Minister’s clarion call of ‘Start-up India, Stand up India’ highlights the multiplier effect that start-ups can have for the national economy and also their direct impact on fostering creativity and innovation.
A number of start-ups have found success in e-commerce and other IT-based applications of the services sector. However, they are yet to take off in a big way in the manufacturing space. We need to accelerate the spread of the start-up movement to a wide array of sectors – agriculture, manufacturing, education, healthcare, and many others.
Under the ‘Start-up India’ scheme, 12,298 start-ups have been successfully recognized by the Department of Industrial Policy and Promotion. The scheme provides several incentives such as tax exemption for 3 years, benefits for Intellectual Property Rights, relaxation in public procurement norms, and faster exit options, among others.
India’s exploding start-up scene is witnessing exemplary successes. As of August 2018, there are more than 260 unicorns, or companies reaching $1 billion valuation, around the world, and India has 13 of them, including firms such as Ola Cabs, Hike, InMobi, Quikr, One97 Communications and ReNew Power Ventures.
However, given the nature of start-ups, nearly 90% of them are seen to fail within the first 3 to 5 years – 1,000 start-ups closed down in 2016. The highest number of failures were recorded in the logistics, e-commerce and food technology sectors. The major factors for their failure include lack of market need, shortage of funding, gaps in the team, competitiveness, poor marketing, or product mistiming.
Corporate Connect – The Novel Approach
The high rate of start-up failures calls for newer strategies for improved success rates. Mentoring by external experts or providing easy finance ultimately may not prove beneficial in the long run. Understanding market needs is crucial for any start-up.
To address the issue of market reach and access for start-ups, a novel approach is to link them with large corporate houses in allied business areas. In our new initiative to facilitate this ‘Corporate Connect,’ start-ups are nurtured with specific knowledge inputs and also supported with adequate financing by large corporates. In the process, the start-ups develop products or services catering to the needs of the large corporates. Thus, they quickly become an integral part of the supply chain or devise newer technologies for better efficiency or productivity.
In due course of time, the corporates may also plan for investing substantially in these start-ups, helping them stand on their own feet. Such a dedicated corporate connect with the start-up will go a long way in helping ideas germinate into appropriate end-uses and ensuring the success of the startupreneurs. On an encouraging note, many companies have already signed on to such a program to strengthen the start-up ecosystem in the country.
It is of vital importance that promising start-ups be recognized for their excellence in cutting edge technology and innovation, wealth creation, and employment generation. Financial support and mentorship for start-ups in different sectors with the point of view of potential business partnership will aid them in scaling up their businesses.
Note: This article was first published in the Financial Express on 23 November 2018.