Why India Lacks Product-based Startups?

By siliconindia   |    2 Comments
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Bangalore: With a vast pool of talent and scope for establishing various industries, India also has great power for innovative thinking. India has seen several great success stories, however, almost all has been in services and very few or handful in the product-based companies. But all these positives contribute towards forming service-based startups. There are several factors resulting in the lack of product-based startup in India. One of these is the massive requirement of R&D. A product company initially needs more investment than other sectors and it even takes much longer to pay back. This takes the risk factor to a higher level. Moreover, any product launched without proper R&D might result to startup failure. The startup eco-system in India is still in the evolving phase and VCs are not eager to invest in companies that cannot pay off in duration of three to five years. The main deficit of in the current eco-system is the lack of product management capabilities that had led to cash burn - that in turn leads to lack of fund and inability to raise funds - thus killing the startup. Today, with few angle investors intended to invest lump sum amount in startups, many still restricts themselves to service-based industries due to easy and early return resulting in back seat of product-based entrepreneurship in India. We can hardly see any exit startup stories to build higher confidence in the talent resource and the investors community. The talent pool also plays a vital role in this backlash. Though with a vast pool of experienced human capital resource, most of them are trained from the point of view of service-oriented companies and their skills too matches the sector. The add-on to it is the boom in this economic sector resulting in more and more job opportunities. Few product companies start their business without validating their idea in terms of real customer usage resulting in venture failure. Startups often are centered around an idea that comes from the founder. He starts the company, raises fund and hires people on the way to develop his company. But along the way, other stake holders join him with their own additions to the original idea. And this becomes the turning point for his venture. If the ideas supplements and complements the original one, then the product succeeds in the market, or else, they make the fatal mistake of adding new ideas/features/functionality into the product that results in a turgid product that never sees the light of the day. For increasing the number of product-based startups, everyone involved in the eco-system needs to take a tool over their thinking and working process to bring in a great change in the scenario. The investors should hold patience in terms of return and help these companies to go IPO. Even the budding startup entrepreneurs should come up with great and concrete product ideas to leverage the un-exploited market.