Hello everyone,
Today I am writing about start-ups because a very large number of students are opening their start-ups or are joining existing start-ups after graduation. The number of start-ups is growing at an exponential rate, and I believe that this will be a continuing trend. Typically most start-ups are founded by students right after college or young professionals. The sad part of start-ups in India is that most founders typically sacrifice their career, earnings, & personal life. This blog is little bit lengthy than my previous blog. My aim in this blog is to highlight some of my thoughts on why I think most Indian start-ups fail, and look at possible solutions to this problem. Additionally, whatever I am writing is from my personal experience that I have gathered from some of my friends, friend’s friends, ex-students, and newspaper reports. Nevertheless, I feel that in the broader interest of society, I should summarize what I have learnt from people who have founded start-ups .
The first building block of a startup is the idea. However, the idea of a startup is very different. It is a new business model, or a new product that needs to be sold to an upwardly mobile middle class. They might not like the idea, might not be enthusiastic about it, or there might be many other competitors with better offerings. Since most start-ups are internet based, the chances of competition are very high. Clearly the idea has to be new, fresh, innovative, technically sound, free of legal issues, socially acceptable, and needs to have the potential to make a lot of money. Most founders of start-ups in India are typically young professionals. Note that these people typically have good pedigrees, are confident, articulate, and have an appetite for taking risks. However, this is not sufficient. If we look 10 years backward,most students in India start losing touch of real life once they are 15-16 years old. The pressure of getting into a premier institution (IIT/NIT) is overwhelming. Students from small towns typically move to coaching hubs such as Kota in droves and spend the next 2-3 years preparing for different entrance exams. They have hardly any time for anything other than studies. Once they get admitted to a premier institution, the situation does not change significantly. Most of the time, the first year is typically the most strenuous in terms of studies primarily because students are new to the system, and a lot of them want to change their branch of study.
The subsequent years are no better in terms of developing a world view. Since most students stay in hostels and have limited access to television, they are mostly unaware of events of national and international importance. Reading newspapers or anything for that matter seems to be out of fashion these days, Secondly, most campuses of premier universities are like “virtual worlds” — fairly cut-off from the rest of the society. As a result, students do not develop a world view and do not develop an understanding of society. The situation does not grossly change in the first few years after joining a job. A typical job in a multi-national company in India involves very long hours and leaves little time for professionals to interact with the society at large. The weekends are often spent sleeping, partying or travelling. As a result most of the people that I have talked to in this matter have a little understanding of the needs and requirements of a typical middle class family. They are mostly aware of the requirements of their friends but not of somebody who has young children and aged parents to take care of. Note that India has a very large middle class with a fair amount of spending power. Unless we understand their needs and aspirations, our products might not be what they are looking for. This discrepancy in perceptions and actual requirements is a big reason for start-ups not getting enough customers.
One more thing, I would like to add that we have an enough number of startups that focus on online retailing, analytics, and social media. Why not have high technology start-ups that focus on the defense, aerospace, and high end manufacturing industries? Any start-up that is based on technology rather than on an apparently “good” marketing idea has a far higher chance of success. Let us take a look at the math. If a social media start-up earns 10 paisa per click (high in my opinion) it will take 10 million clicks to earn 10 lakh (1 million) rupees per year. This is a very high number, and we clearly need to operate at a very large scale. In comparison, a well made piece of technical software or service can fetch upwards of 1 crore (10 million) rupees in a single deal. However, to produce such software it is necessary to be highly trained , have loads of R&D experience, and have very good contacts in the industry. We have a massive dearth of such people and this leads to extremely low tech start-ups .
Let us now come to the next important factor — money. Money is an important ingredient for almost everything including a start-up. A lot of founders of businesses do not approach formal banking channels, and do not take advantage of government schemes. If we talk about budget, a thousand crores (200 million dollars) have been allocated to funding start-ups . It is true that to get government funding the proposal has to be above a certain bar because most of such proposals are reviewed by a team of experts often consisting of academics. This is a good thing, not a bad thing. Writing a good, well studied, and technically consistent business plan is not just desirable, it is also essential. If a group of founders think that they have a document that clearly elucidates their business idea, value to the society and the nation, then they should approach the government, and ask for help and guidance. Most students feel that the government is out of reach, and you need connections. But I think, in this day and age, the government is far more honest and approachable, and ordinary citizens should at least make an effort to leverage government schemes to the fullest possible extent.
We have talked about the idea, and money. What next? Well, it is talent. Most of the time, the founders of Indian start-ups are business school graduates who might have worked in top finance/consulting companies, or are technical people without any interest in technical work. They are the ones that carry fancy titles such as a CEO, CTO, or COO, and there are others who often do the technical work. This particular trend leads to a disconnect between the employer and the employee. The employee is typically not from an extremely privileged background yet spends 60-70 hour weeks tirelessly writing computer code. The employer is the one who often looks at the sales/marketing aspects and often places unreasonable demands on the employee. Let us now come to the employees. In today’s market finding a good computer programmer is very hard. This might sound ironical given the number of top colleges that India has; however, this is true. Most of the students in top institutes are hired by very well paying multinational firms. It is very hard for a fledgling startup to match an MNC salary. As a result start-ups often have to go to other non-premier colleges to scout for talent. There is a big divide in India between different classes of institutes, and start-ups would often find otherwise sincere students that lack sufficient practical skills. It is not wise to invest a lot of money in training employees for an early stage start-up. They need employees who are all set to begin coding, and thus being productive. This is seldom the case. It is even harder to find mid-level professionals who can lead teams. Their salaries are either high, or they have shifted to people management in their companies. In both cases, such people are not suitable for start-ups in their early stage.
Also note that in the Indian educational system, the emphasis on practical skills is somewhat low. This might be not very relevant in premier institutes where students have other avenues for exploring their creativity, but for the rest of the educational institutes this is a very important issue. It is paramount that we produce students who companies can hire immediately after graduation. Spending lakhs of rupees on training students to write even the simplest of programs or create the simplest of designs is not the job of companies. Only big companies like Infosys can afford it. Small start-ups cannot afford this luxury, nor should they be in the business of training. We are not just talking about technical skills here. A lot of the graduates in this country are severely deficient in liberal arts skills. Ideally speaking, we want an engineering student to write flawless English (or a vernacular language, if the need arises), be articulate, and be able to present to a technically literate audience. We will find very few graduated students with these qualities if we start looking. A lot of students pick up these traits later in life; however, a broad majority of them do not. This has resulted in a very low level of language proficiency in adults. Unless the Indian educational system starts putting a greater emphasis on humanities skills and focuses on all round personality development, we will never find people who can run modern internationally competitive businesses.
After reading the above blog, many of you become bored because of its length but it will be beneficial for you. I have written this blog specially for current batches, so that they can think something before taking any step, because some of you are planning to work for start-ups. I hope after reading this blog you all get a chance to overcome your deficiencies.
~PALASH JAIN
A journey of a thousand miles begins with single step. 