Indian Startup Ecosystem – Still a long way from Silicon Valley

As mentioned above, People in India are scared to take risk because they have never been taught to take decisions on their own. They lack the confidence to face the consequences of their own decisions. The fear of failure is so much that we don’t even give it a try. Everyone suggests the safer route, do an MBA and get a good high paying job and stay happy with the 10% year on year growth. I agree the success rate is very low in startups but that is no reason to not follow your dreams. There are hundreds of success stories right here in India too and I strongly believe that if you give your heart and soul to something you can never fail in that. Naveen Tewari’s Inmobi mobile ad network is one of many such great examples. Naveen and his team survived by paying the minimum due on about 14 credit cards (that’s right!), until they raised initial venture capital to sustain and grow. It was his persistence and belief that kept him going and now even saying that Inmobi is a monstrous success is an understatement.

Another strong barrier is the amount of social pressure we have here in India. If I fail what will my family think; my friends will make fun of me. How will the society react if I start something like a dating app or a small food joint? It’s this social pressure which really scares everyone and one of the many reasons the brilliant students don’t even dare to think to start something of their own. It is something which our western counterparts don’t even take into consideration. Their upbringing allows them to make their own decisions and bear its consequences without getting much affected by society. My own sister(born & brought up in US) after finishing her schooling came and spend a year in India with a NGO as she needed more time to think about her future plans. I can bet anything that no Indian kid would ever even think of doing such a thing.

This was all from the entrepreneur side. Let us now look at it from the ecosystem we have here, mainly focusing on the funding and the kind of ideas which find support.

Every startup needs funding in its initial stage. Funding is comparatively easily available in the west than in India. I’ve worked for more than a year in a startup and that’s how I know how difficult it is to find funding here. Venture capitalists in the US easily fund even crazy ideas like Snapchat, Twitter, Daily Candy, etc. during the stage of their inception but such ideas find no takers here. The VCs here want a clear roadmap of revenue from day 1. When Snapchat rejected Facebook’s $3 billion, there were a lot of buzz and gossips. “Are they crazy” was a common reaction about it in India. India also has some really good startups with pretty decent valuations but we haven’t seen any monstrous success. There is an underlying reason behind the success of startups in US. To sell “Crazy ideas” revenue is never a problem. Some of the biggest examples are Google, Snapchat, Facebook, Twitter, Youtube, Foursquare and Lightbox. There is a large list of ideas which at the face of it looks ridiculous but are definitely worth investing.

Peter Thiel, cofounder of PayPal, announced the Thiel Fellowship in September 2010. He paid children $100,000 not to complete their college education. He wanted students to think big and create world-changing companies instead of wasting their talent at school and being burdened by “incredible amounts of debt”. I am not saying that everyone should dropout of college. If you have a really good idea or if you are really passionate about something you should surely give it a shot.

People in US have an astonishing access to easy cash. And yes, it’s probably ‘easy’ to obtain at least the seed capital. When the founder of Instagram visited a cocktail party of one of the start-ups in Silicon Valley, he got an opportunity to meet two people from Baseline Ventures and Andreessen Horowitz. One of his colleagues from Google, where he worked earlier, made the introduction. Systrom writes on Quora, “I showed [them] the prototype, and we decided we’d meet up for coffee to talk about it. After the first meeting, I decided to take the dive and leave my job to go solo and see if Burbn could be a company. Within two weeks of leaving, I raised $500k from both Baseline and Andreessen Horowitz, and started work on finding a team.

VCs here are still not as mature as their counterparts in the west. They still don’t ask the right questions. Take the example of users vs. revenue. When people pitch their ideas to the investors here, the first question the investors ask is how you will earn. If the same pitch is made in Silicon Valley the first question will be how you will get the first 1000 users. This difference in the mindset affects the startup world. If you have your first 1000 and you know how to grow the base then finding a revenue stream is not problem. Having a large number of users and the inability to monetize them is a non-existent problem. This problem is in getting the initial funds. Facebook, twitter, and others have proven it so why can’t we. But, no the investors here want to know how we will earn the revenue. The real question here should be how we would grow rather than the revenue stream. In the words of Andrew Chen, the question should be “Could this product engage and retain 100s of millions of active users?”

There is still some hope left and the scene is not as bad as it sounds. Budget 2014 had been good to Indian startups. Finance minister Arun Jaitley had allocated Rs 10,000 crore to develop a better startup ecosystem in the country, much to the joy of all young entrepreneurs. Indian start-ups are finding takers from US, Japan etc. This will make the Indian VCs also change their mindset though the process will be slow and gradual. I would like to close this article with one of my favorite quotes:

“Build your own dreams, else someone else will hire you to build theirs”

Chahat Shah

I am a first year student at IIM Shillong. I started my career as an online marketing associate at CityShor, an online lifestyle media start up. Outside of the work, I’m a fitness enthusiast and love listening to electronic music. My interests include photography, experimenting with designing techniques on Photoshop and reading about start-ups.