Major Reason Why Most of the Startups have Failed in India

There are almost 800 IT startups which collapsed in India within the first 9 months of inception from the total count of 7,000 in all of 2016.

No doubt, India is providing a perfect nurturing ground to thousands of startups in the last few years, but unfortunately, most of these are the replication of Western setups. A study also revealed that there is a lack of strong technical innovation in India which has closed the doors of investment by all the entrepreneurs.

IBM Institute of Business Value & Oxford Economics revealed a shocking fact in the last few days; that there are 90% startups in India which are unable to grow in their early stages. Even two-thirds were collapsed in the first five years of inception due to the lack of smart technical innovation.

The Government of India is strongly supporting entrepreneurship and struggling continuously to become the most powerful 3rd largest startup platform in the world. But the fact is, the country is also leading the way towards poverty and unemployment, as thousands of startups are closing down every single day.

Lack of a distinctive business model:

The ‘Entrepreneurial India’ a recent research report has analyzed that the reputation of Indian startups has successfully increased in the last four years. But there are 78% venture capitalists who consider that they do not have a distinctive business model that can set them apart from others in the competition.

CEO of the market intelligence company stated that: “Since 2015, more than 1500 startups in India have closed down in the first three years of inception. One of the main reasons is we have followed the Western business strategies, and failed to generate funding options to raise capital from the reliable investors.”

The business sectors which have the highest failure rates are IT, food industry, economics, and home improvement. Contrary to that, if we compare the current state of Indian startups with the USA, then we will discover the fact that, the same industries are operating at its peak. For example, the home improvement industry is getting stronger every single day where the companies like Renovaten, Porch and Modernize are improving lives with highly advanced home improvement technologies.

According to experts, India has a strong follower market despite its artificial intelligence machine learning adopted in the finance and banking industry.

A study revealed that, when it comes to Global innovation, the country has been listed among the topmost communities. The failure is credited with the poor development in the education sector of India.

India has ranked 66th on the list of global innovation index. Thus it is believed that the country is going to become a global platform for entrepreneurship due to its high potential, an efficient talent hub, and a network of innovation.

However, there are various weaknesses in the indicators for the business sector, such as the education expenditures and different business creations.

A significant indicator is the average number of International patents the country has applied for; such as India applied for 1,423 patents in the year 2015-2016, while China applied for 29,846, Korea 14,626 and Japan 44,235.

Submitted by guest writer Ambreen Sajjad