Tuesday, April 16, 2013

Titanic : The story of startups in India

There are roughly 800 start ups registered in India in a year against a million in US. Of these around 30% liquidate every year claiming bankruptcy. India ranks among the world's worst countries at encouraging entrepreneurs. For ease of starting a business, India is 173rd out of 185 countries.

The Reasons?

 Well you really don't need rocket science to understand them.

Starting a start up in India is a herculean task for those who ain't familiar with the Indian Bureaucratic system.
So horrible is the situation here that if entrepreneurs refuse to pay these thugs, they assault in throwing stones at workers and beating supervisors (A Fact acknowledged by Mysore based X-Ray Entrepreneur).

Everything from registering a company to getting electricity connection to paying taxes involves a bunch of lengthy processes nurturing corruption and red tapism.
Below graph displays the dismal ranking of India in an economic survey of startup businesses.

Out of 185 countries, India lags behind more than 50% of other nations in the world. Indeed a shame!
One of the most evident failures depicting this is the aadhar scheme, India's biggest technology startup by Nandan Nilekani. While the UID scheme aims to bring the entire population under one roof, God knows how that is possible when getting a UID can take you a minimum 6-10 visits, 10-15 hours in queue and a seriously disappointing bio-metric system (took me more than 8 tries to get it right)

Inefficient government policies do play a huge role in the doom of start ups but that apart there are a major chunk of other problems in the road ahead.

1. Indian Education system is job oriented and their is almost no formal education on entrepreneurship.

2. Indian culture lacks respect for start ups. Majority of the start ups that open up every year are by people from age group 40-50.  Going by this trend, start up is more of a retirement option in India. Also a young entrepreneur faces so much cultural obligations that finding a bride/groom becomes almost impossible.

3. India lacks Venture capitalist which perhaps can be the backbone of a middle class start up. Current Govt policies continued will in future keep this scenario unchanged.

4. We in India like making things difficult. Government imposes tax regulations by which startup firms are mandated to pay income tax on the premium they have charged over their fair market, while selling shares to unregistered investors, including private equity and venture funds. Though this aims to stop money laundering, analysts say it will affect the investment scenario for start ups. 

Another nail in the head!


India is the new titanic and most of the start ups clearly are leaving this sinking ship. For those who remain here seem either over confident or Bharat Bhakts.

Start ups in other countries are because of the government whereas start ups in India are inspite of the government.

Wakeup India before its too late to mend the holes! 

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