What is Startup, Meaning, Definition, Issue of Startups, Stage of Startups

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In the recent decades, startups have received much attention all over the world. In India, the startups have become stronger as more and more support has been made available to them in all aspects. These startups are now widely recognised as important engines of growth and for generation of jobs. Startups in India started emerging in the 2000s but the ecosystem was not mature as only few investment opportunities were available and supporters such as incubators and startup accelerators were limited in scope. In the last 10 years, the number of startups have increased at a faster pace and more support systems have been generated by industry as well as the government. Bengaluru has emerged as the primary startup hub but the startups of India are also present significantly in Mumbai, NCR and other regions.

While startups are mainly focussed upon technology driven solutions but there are various startups that are non-technical, social and micro enterprises which provide innovative ideas and solutions. India ranks third in the world in the startup ecosystem. Startups are expected to create nearly 2-2.5 lakh jobs in the coming years.I n the recent decades, startups have received much attention all over the world. In India, the startups have become stronger as more and more support has been made available to them in all aspects. These startups are now widely recognised as important engines of growth and for generation of jobs. Startups in India started emerging in the 2000s but the ecosystem was not mature as only few investment opportunities were available and supporters such as incubators and startup accelerators were limited in scope. In the last 10 years, the number of startups have increased at a faster pace and more support systems have been generated by industry as well as the government. Bengaluru has emerged as the primary startup hub but the startups of India are also present significantly in Mumbai, NCR and other regions.

While startups are mainly focussed upon technology driven solutions but there are various startups that are non-technical, social and micro enterprises which provide innovative ideas and solutions. India ranks third in the world in the startup ecosystem. Startups are expected to create nearly 2-2.5 lakh jobs in the coming years.

How are Startups Defined?

Due to subjectivity and complexities involved in defining startups, there is no clear definition of startup existing in India. A startup is a young company that is beginning to develop and grow, is in early stages of operation and it is usually financed by an individual or a small group of individuals . The company could be an entrepreneurial venture or a new business, partnership or temporary business organisation. The startups mostly searches for a new business model in order to disrupt existing markets or create new ones.

Stages of a Startup Life Cycle

The stages of startup Lifecycle includes Pre-startup stage, startup stage and Growth stage.

Pre-startup Stage

• The startup discover a potential product or service idea for a big enough target market.

• The service or product discovered launches in the market, looking for clients who are ready to accept the product and pay for it.

Startup Stage

• The startup begins to define his/her business model and looks for ways to increase their consumer base.

• The growth of business is such that it has the capacity to grow in a sustainable manner.

Growth Stage

• The entrepreneur seeks to maximise benefits and acquires huge resources or collaborate with large industry players so that the brand continues growing while going through this life cycle. It is supported by research organisations, the team members of startup, investors, mentors, advisors, other enter preneurial people, people from related organisations, angel investors, venture capital funds, government schemes, programs and various incubators.

Issues of Startups in India

Some of the major issues and challenges before startup in India are

• Financial Resources

Availability of finance is critical for the startups. The requirement of funds increases as the business progresses. Only limited avenues for financing are available for the startups such as family members, friends, loans, grants. As startups do not have collateral, availability of formal bank loans is limited.

• Revenue Generation

Several startups fail due to poor revenue generation at early stages. As the business grows, expenses increases with reduced revenues, forcing startups to focus on funding aspect rather than business fundamentals. The lack of revenue also reduces efficiency of the business, there by affecting overall sustainability.

• Lack of Human Resources

Startups usually consist of trusted members with complementary skill set. Failure to have a coherent team could become a major reason for the failure of startups. For job-seekers, joining startups as employees is not an attractive career as young job-seekers prefer to work in large corporations where there is security and stability in jobs. Also, while hiring employees, startups have to invest significantly in the training of the untrained professionals whom they hire.

• Lack of Supporting Mechanisms

A number of support mechanisms such as incubators, science and technology parks, business development centres are inadequately developed in India. This also reduces their efficiency and working ability. It increase the risk of failures of startup at early stages.

• Lack of Markets

Startups often fail to take off due to lack of sufficient market mechanisms. The market environment for a startup is very difficult due to its unique product that seeks to disrupt the markets. The situation worsens if the product is altogether new as it has to build everything from beginning, The startup also needs to have thorough domain knowledge of the counter competition with appropriate strategies.

•Regulations

Starting a business requires a number of permissions from the government agencies. Regulations for labour laws, intellectual property rights, dispute resolution etc are rigorous in India. Startups often feel burdened with the bureaucratic procedures which are very complex for a startup to fulfil. The process of registration is lengthly and costly. Tax policies are also considered unfriendly for the startups.

• Lack of Startup Friendly Policies

Though many government schemes and programmes have been started but still there exists a gap in startup friendly policies that comprehensively promote startup ecosystem in India. Even after the establishment of a startup, the startup has to comply with the state as well as central rules and regulations to sustain and survive the initial risks.

• India’s Diversity and Information Gap

India has diversity of cultures, languages, ethnicities and religions. This makes the Indian customer base diverse and it creates limitations for the startups in setting up a PAN India business. Most of the startups are started in urban areas, whereas 68% of population of India lives in rural areas. This creates a disconnect between the startup owners and the consumers for whom they aim to build products.

Realising the Potentials of Startups in India

The Indian market provides a diverse range of opportunities for startups to solve that are unique to India.

The startups in India will realise their potentials because of the following reasons

• India’s Large Population Size

India is a country of 1.3 billion people with a significantly large size of young population. The startups offer plethora of opportunities for this young population to create products that are useful for solving problems which are plaguing India. The startups, engaging with the young Indian people can work as a tool to provide a major push to the Indian economy, catering to diverse needs of Indian people.

•Changing Aspirations of Working Class

In recent years, working class has become more aspirational. Rather than working in traditional occupations, the working class wants more challenging jobs, that have problem solving aspects. Several high profile executives also shift their jobs to work for startups. Number of students joining startups and e-commerce companies have considerably grown in the recent years. This offers great opportunities for startups in India.

• Huge Investments in Startups

Huge investments in Indian startups from foreign as well as Indian investors is taking place. As the government has pushed for an enhanced role of startups in the Indian economy, more angel investors are now ready to invest in new technological startups that have products to disrupt the existing markets. New investors are now more confiden of investing in the startup ecosystem as they have trust in the new age entrepreneurs of India. This creates a good base for the startups to realise their potentials

•Increasing Innovation

India has great potential for innovation. It has its own challenge of education, health, infrastructure and gap between its rural and urban population and rich and poor. It provides an important platform for Indian startups to innovate, create and make future leaders. There is a huge gap which needs to be fulfilled, which can be fulfilled by Indian startups. The middle class of India provides a rich consumer base for the Indian startups to get successful and simultaneously solve problems that India faces.

•Government Support

The government of India has been active in providin necessary support for the startups in India. It has run various schemes and programs so that startups can be nurtured. This idea is to improve the startu ecosystem and nurture entrepreneurial spirits. The biggest program is the Startup India Scheme that was launched in 2016. This aims at simplification of processes and handholding for startups, providing funding support and incentives and Industry-Academia partnership and incubation. A 10,000 crore startup funding pool has been setup under this scheme.

The government has several other schemes such as ASPIRE scheme for promotion of innovation and rural entrepreneurship. It aims to promote startups in rural regions. Atal Innovation Mission was, started by NITI Aayog to create cooperation between centre, state and local innovation schemes and promote entrepreneurial spirit from the school level. A credit guarantee scheme for startups has also been started that aims to provide financial stability to startups. Other schemes such as e-Biz portal, MUDRA loan scheme etc. have been operating to provide aid to startups in India and promise a rapid growth.

Way Forward

The government should promote measures to raise educational levels by creating programs that will increase the awareness about entrepreneurship. If entrepreneuri skills are developed at the level of schools and colleges, it will provide an early push for startups in India.

A comprehensive push for the startups by creating more government friendly schemes, policies, providing support to startups at early stages, setting up more incubation centres etc. will provide a neccessary support for startups. Investment creating infrastructures such as rural roads, colleges, schools, better urban areas, etc. will increase the markets for newer startups. Their risks can be reduced by providing supports at every stage of the startup life cycle, till it becomes self-sufficient

Policies that aim to increase ease of doing business, easy labour regulations, lessen time for registrations and easier compliance mechanisms throughout the startup life is required. If the startups in India grow, it will support a large and diverse Indian population, improve their standards of living and create jobs for Indian economy.

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