Building Tech Startups in India: Summary

The Good

It is a matter of time

The local market for technology products is nascent; the VC model for financing startups fairly new and some issues will work themselves out over time. The current vicious circle – relatively inexperienced entrepreneurs and risk-averse VCs – needs just a few hits to break the cycle.

The Bad

Distance to the market

Startups that aim at the US market (or even those targeting domestic market but want to go global eventually) are hampered by not being close to the market. This can be and is being bridged by cross-border operations or channel partnerships.

The Surprising

The Funding Gap

As we talked about, while there is a lot of money flowing into India in total, there is still dearth of capital at the seed stage. This is primarily because of the fund economics and alternate opportunities available to the investors. Given that, it is unclear to me if the situation can improve in the short-term.

Product versus Service

The issue here is not as much about lacking a “Product DNA” as is usually talked about, but more about investors and entrepreneurs recognizing the different characteristics of product and service firms – e.g. cash flows, funding needs, product development lifecycles, etc.

In summary, there is a lot of entrepreneurial energy and excitement in India. Some issues, such as motivating employees to join startups or finding mentors and role-models, are temporary challenges that will resolve over time. Others such as bridging the funding gap and accessing the market need action on the part of investors, professional organizations, and entrepreneurs.

Note: I will continue to explore these issues in the project and plan to share a follow-up post in a few weeks. My contact info: aparnac at mit dot edu.

This segment is a part in the series : Building Tech Startups in India