Every now and then, we come across news of some startup or another receiving this much or that much of million dollars worth venture capital and this makes us believe that everything is hunky dory in the Indian startup world. But, unfortunately this is not the case.
While it’s true that consumer Internet companies are coughing up billions of dollars from venture capital firms, there are some startups on the other hand that have been looking for investment for years now and have come down to the extent of shifting base from the country in order to survive. These startup mostly belong to the innovation driven technology genre.
The state of innovation driven technology startups in the domestic start-up ecosystem can be assessed from India’s steadily slipping rank in the list of global innovation hubs. According to a 2014 survey jointly published by Cornell University, Insead and the World Intellectual Property Organisation, India currently ranks 76th as against 66th rank in the year before.
The main reason for Venture Capitalists decreasing activity in the innovation driven technology startups is, that they typically favour firms that have an addressable market of Rs.1,000-5000 crore and the potential to capture at least 10-15% of the market in about next five years. Unfortunately, this is not the case with most of these innovation based startups in their beginning years.
The current trend in the Indian startup ecosystem involves investors funding in copy-paste start-ups. For example, the hyperlocal food, grocery and on-demand services start-ups have been able to raise at least $100 million in the period of last eight months. According to various industry experts, this is a transitional period and happens everywhere. The country is currently in that interim period where it is a little muted for innovation-led entrepreneurship.
Absence of many previous cases of such innovation based start-ups making it big in a big enough local market also acts as a major hindrance for the investors.
Seeing the issue and potential that the startup ecosystem have in boosting the economy of the country, the Indian government is also taking steps to ensure the availability of funds for small startups. What could be seen as a step in this direction, the government just announced a fund by Small Industries Development Bank of India (Sidbi) last week.