The rise and rise of Startups

Any startup entrepreneur should focus on five essentials for success-a differentiated product or service idea; a sound business model for taking the proposition to the market; a team with complementary skills to scale to the desired level; access to a runway of capital to ensure there are no short cuts and; finally, the ability to identify and tap the right customer segments for growth

Being an entrepreneur in India was, till not so long ago, seen as a risky expedition, not for the faint-hearted and fraught with all kinds of risk. Many of the readers of this column would, like me, have risen from a very small towns and middle-class backgrounds where a safe job in a large corporation, preferably a multinational, was seen as the passport to success and a happy life. There used to be jokes that girls from well-to-do families would be averse to marrying an entrepreneur and if the young man had failed in his startup, his prospects were seen as doomed, for matrimony as well as life.

How many things have changed in the last two decades and how much for the better. It was Silicon Valley in the US that showed the way with “fail fast” and serial entrepreneurship glamorised in the minds of all wannabe tech folks in India. The successes of early voyagers like Kanwal Rekhi and Desh Deshpande in the US and Azim Premji and Narayana Murthy in India, show the pathway to at least one industry sector where entrepreneurship could bloom.

In recent times, the runaway success of e-commerce startups in India like Flipkart, Zomato and Nykaa and Business to Business Software as a Service unicorns like Zoho and Dhruva have excited many youngsters to quit their predictable jobs in large firms and boldly venture into the unknown. The Government has done its bit with Prime Minister Modi’s clarion call “Start Up India Stand Up India” and his frequent reference to unicorns and startup success even in his recent World Economic Forum “On-Line Davos” speech adding excitement to this emerging story.

The annual tech startup report released by NASSCOM recently underlines how 2021 was the year of unparalleled growth in the Indian tech startup ecosystem. India has become the third largest base for tech startups with the second-highest growth rate of funding and proudly boasting of the third-largest number of unicorns (companies valued at more than a billion dollars) with Fintech startups outpacing the world in accelerating digital payments adoption in India. This has also proved to be good for the economy with startups employing over 6.6 lakh people directly and over 34 lakh people indirectly and showing a 10-12% growth in direct and indirect jobs just in 2021.

Eleven exits through public issues and two hundred mergers and acquisitions in this busy space underline the excitement that startups are generating in the country. The fact that 40% of the startups are from outside the major metros, 20% are focused on low-income segments of the market and 12-15% of startups have women founders underlines the value this community has in making inclusive growth happen in the country.

While the landscape may look perfect today, one should hasten to add that any startup entrepreneur should focus on five essentials for success-a differentiated product or service idea, a sound business model for taking the proposition to the market, a team with complementary skills to scale to the desired level, access to a runway of capital to ensure there are no short cuts and finally, the ability to identify and tap the right customer segments for growth. One should not forget that for every celebrated success story, there have been 100 stories that fell by the wayside and it would be foolhardy to throw one’s hat in the ring without thinking through and planning for all the pitfalls that one could enter on the entrepreneurial journey.

At our investment, growth advisory and mentoring company, 5F World; we have been privileged to work with a dozen companies. Nine of them are being led by women who have set out to solve one or more problems of the country or the world. It is heartening that so far only one venture has failed, more because of the changed motivations of the founders than anything wrong with their chosen domain or technology. And the variety of focus areas of our entrepreneurs is many. They comprise copper artisan globalisation; history and culture served up on digital platforms; drug research in India; farm products aggregation; corporate learning platforms; artificial intelligence and advanced analytics training. They are all illustrative of the wide variety of domains in which startup aspirants can search for and find the Holy Grail of success.

The good news is that with India attempting to get on the fast track to success since the middle of 2021, there will be many opportunities, not just in deep tech and digital commerce, but also in smart manufacturing, education, health, agriculture, electric and connected vehicles and alternate energy to build and scale companies in future. The 2025 projections for just tech startups are 36,000-37,000 companies, of which, 180-200 could be unicorns and cumulative valuations could be 600-700 billion dollars. With seed and early-stage funding already at five billion dollars in 2021, double that of the previous year, one can expect to see any success stories flash on your computer and television screens. In the five trillion-dollar GDP economy, embedding a trillion-dollar Digital India, both of which we expect to see happen by 2025, there will be many reasons to celebrate the startups!