The Start-up Eco-system & Difficulties in the Space Date:   Monday , November 24, 2014 Viren Malhotra is well-known and recognized as a \'Scale-Up Expert\' among industry peers, specifically SMEs. He has been instrumental in helping businesses grow organically and scale new heights. He currently works as an independent consultant. The Start-up eco-system in India has seen significant improvements and activity especially over the last decade. However much still needs to happen for the eco-system to be more conducive to innovation and risk taking. From my experience of working with SMEs and Start-ups, I have observed some key issues and challenges young entrepreneurs face. I have listed some of those below. Firstly, lack of Innovative Ideas- Particularly in the core technology domain While the Indian start-up eco-system has witnessed many pure business related ventures, there has been a limited presence of ones that focus just on core technology � which is the uppermost echelon of the Bay Area start-up caste hierarchy. This is probably due to presence of only a limited number of pure technology Indian companies who look to buy out core technology start-ups (hence provide impetus to young geeks). Some other causes could be limited research funding and research orientation of Indian universities. Another factor could be limited specialization, knowledge and confidence at Indian VCs to back tech innovations. Limited Early Stage Funding While early stage funding has now become more accessible to entrepreneurs in India, the scenario could still get better and grow. As per industry estimates, availability of early stage funding could grow 10 fold to adequately meet Indian requirements. Towards this end, the Government in the latest Union Budget announced setting up of a Rs. 10,000 Crore Start-up fund. However a bulk of contribution to this fund is envisaged to come from private sources. When this fund will actually fructify is a question that I dare not attempt to answer yet. Another factor that needs to be addressed is the lack of focus and specialization among VCs in India. In India we still largely have general VCs rather than sector specific VCs, barring a handful. This will likely take a while to emerge as the start-up eco-system will have to grow enough to warrant such specializations. However when this happens it will encourage deepening of start-up culture in India. Crowd funding is an option that is often talked about as a possible funding option for start-ups. However there are two obstacles in this path. Firstly SEBI has to establish guidelines on equity crowd funding (else remember \"Wolf of Wall Street...\"). Only thereafter will crowd equity funding become an option of sorts. As far as crowd debt funding is concerned, like it or not, this has become unfeasible by the new Companies Act. Lack of Regulatory Clarity Even after all these years the e-commerce system still lives with the regulatory uncertainty over FDI in B2C e-commerce. Various compulsions have made it difficult for the government to provide clarity on this as well as the GST implementation timeframe. These unnecessary speed breakers do not make it any easier for start-ups in the domain. Navigating Bureaucracy -Particularly for manufacturing start-ups If the start-up is a manufacturing based company, then the challenges or initial hiccups acquire a different hue of complexity. These manufacturing start-ups will typically have to contend with multiple inspectors and local level bureaucracy. As we are well aware that is never a very pleasant task in India and is an unwanted drain of time and resources of the young entrepreneur. Limited Mentoring Till very recently, there was next-to-nothing mentoring available to budding entrepreneurs. However some excellent work done by TiE has ensured that select high potential start-ups receive structured mentoring. However there are still many start-ups that are unable to attract any guidance, even if whether it is to bring the curtains down on the venture. This is likely due to limited availability of high quality mentors in India � expected because the start-up culture in India is still nascent. Lastly, the Failure Stigma and Hiring a Team Most Indians are still averse to taking risks and family and peer pressure usually tend to push the younger generation towards a comfortable job rather than go through the hard start-up journey. This not only impacts the risk appetite (and possibly discourages) of potential entrepreneurs but also makes it difficult for start-ups to hire quality teams. Therefore finding the right talent, particularly for a non investor backed start-up, therefore becomes difficult.