5 Nagging Problems That Continue to Bother Indian Startups!

Why are startups failing at an alarming rate? Checkout this guest post by Jaydip Parikh.

Startup problems in India
Startup problems in India

India boasts of one of the largest startup ecosystems in the world. According to the Nasscom Startup Report, more than 1000 startups were added in the year 2017, taking the total number of startups in India to approximately 5200. Despite the healthy growth in number, the Indian startup ecosystem is struggling for creation of sustainable startup business models, handling hiring issues, defeating ease of doing business statistics and more.

Startups in India face a set of unique challenges due to the lack of innovation and entrepreneurial culture in the country. Over the past decade, there has been a transition in the mindset of the youth. Instead of seeking job-centric success, they are exploring the path of entrepreneurship, attracted by the young and exciting startup ethos.

Still, the pace of cultural shift to accept startup entrepreneurs is slow. There are a number of nagging problems that are impacting the growth of startup ecosystem including the below:


Unfavourable Government Policies

Standing at 100th position in World Bank’s Ease of Doing Business List, India definitely is not among the most entrepreneur-friendly countries in the world. Though there has been encouraging leap in India’s position on the list, still, unfriendly government policies make it hard for entrepreneurs to set up and operate startups in India.

The government certainly has taken steps to promote startup culture in the country – think #DigitalIndia – but endless bureaucracy and complex tax laws give startup entrepreneurs a tough time every step of the way. Compared to OECD countries, where it takes 9 days to set up and start operations, it takes 30 days to start a business in India.

There are other regulatory roadblocks, too. For example, a startup cannot raise an invoice until the time it doesn’t have an active GST number. The government, therefore, should aim to create a facilitative environment instead of punishing entrepreneurs with regulatory whips.

To grow the number of startups and encourage entrepreneurs, government has to take steps for complete transition of bureaucratic system to make India a startup-friendly nation. Instead of passing laws and extending grants and loans, there is a need for fast-track implementation of policies to create a startup-friendly environment.

Lack of Innovation

There has been a growing culture of replicating the success of successful western startups in India. Instead of focusing on building products that solve on-ground problems, entrepreneurs in India just copy the business models of performing startups. The lack of vision and innovative streak in startup community is limiting success in India.

Entrepreneurs in India simply try to make a quick buck by adjusting western business models to the Indian scenario. Flipkart took Amazon’s business idea, Ola copied Uber, Snapdeal (initially) aped Groupon, and so on. There are hundreds of other examples where innovation took a back seat and instead entrepreneurs focused on duplicating business models for quick profits.

Often, Indian startups also try and develop a business model depending on existing industry behemoths such as Google, Apple or Facebook. A slight change by these companies in their algorithms or operating styles tend to have a drastic impact on revenues of these piggy-back startups.

The need of the hour is to fuel an innovative streak instead of getting on a bandwagon. If innovation isn’t the core of a startup idea and it is not solving a unique problem, the startup isn’t going anywhere.

No Brand Differentiation

A horde of me-too products in Indian startup ecosystem is another problem that is impacting long-term growth. As discussed before, most of the startups replicate successful business ideas without any brand differentiation. This makes them yet another product with no unique selling proposition. They continue to struggle in the crowded marketplace and resort to unsustainable marketing techniques to pull customers.

The rise of cashbacks and discount culture is a great example of this situation. Instead of providing customer with a unique service or product, startups start offering services at a discounted price. Even biggies like Flipkart aren’t immune to this practice. In such a scenario, gaining customer loyalty becomes hard. Customers simply choose the service provider with lowest price, as a result of which the startup never grows a loyal customer base.

Incidentally, innovation and good marketing have repeatedly proven that “the price-conscious customer” is a big myth.

Brand differentiation is essential to grab a permanent place in the market. Startups on the other hand have begun focusing on short-term benefits like getting the attention of VCs by developing short-term revenue models that defeat the whole purpose of starting up in the first place.

Remember, before you can differentiate your product and rise above the price wars, it is essential that you plan and put in place a continuous and effective online reputation management process for your company as well as brand. This will build the base for you to stand out from the average, me-too products out there.

Educated but Unskilled Workforce

According to a study by Aspiring Minds, only 3% of all the engineering graduates in India have the necessary skills for programming. India produces the largest number of engineers in the world. But quantity has overshadowed skills and knowledge. This is an alarming situation as startups aren’t finding it easy to hire talented workforce that can help in product development.

Being the country with the largest IT workforce on the planet, the education system has miserably at developing a logical mindset among fresh engineering graduates. As per the Aspiring Minds study, only 4.77% of the engineering graduates can write the correct logic for a computer program. Owing to a large pool of unemployable workforce, it’s no surprise that Indian startups lag behind their global peers.

Cultural Biases

India has traditionally shunned career risk and entrepreneurship. Though there has been a definite shift lately in the mindset of youngsters, society still finds it hard to accept entrepreneurs. The young generation is motivated to earn money instead of solving a consumer problem through a great product.

Also, failure is frowned upon in society. In a country that loathes hard work and failure, being an entrepreneur is like sleeping on a bed of thorns. Most parents coerce their children to work hard to secure a stable job and see entrepreneurial ventures in low light. When the youth isn’t motivated to pursue their own ventures, it is hard to develop a thriving startup ecosystem in any country.

The Way Ahead

The Indian startup ecosystem definitely shows limitless promise. Once the roadblocks we discussed here are unblocked, there’s room for steady growth. Collaborative efforts of the government, society, mentors, and angel investors can help Indian entrepreneurs tackle these worrying problems and succeed in building valuable products.

About author:

Jaydip Parikh is the founder of Tej SolPro – a leading SEO agency which provides white hat SEO services to clients across the globe. Jaydip has more than 15 years of experience in the field of sales and digital marketing. He has taken lectures on various topics of digital marketing at numerous renowned institutes. He regularly speaks at various conferences and events, both online and offline. He is known as Jaydip Baba in the digital marketing industry.


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