India has been seeing a massive increase in the number of startups in recent years. Over 1300 active tech startups were added, totaling 25K to 27K active tech startups in India, as per a NASSCOM report. This country has the second-highest count of unicorns in the world in CY2022. Despite the growth of the startup ecosystem, several challenges are still there found, interfering with the growth and success of startups in this nation. In this guest post, we will discuss some of the major problems faced by startups here.
Top Problems that Indian Startups Face
Let’s catch up with the roundup of some serious problems that new companies face here.
- Lack of Funding
One of the most significant challenges or risks faced by startups in India is the lack of funding. There are many startups that remained unfunded. Their struggle to secure funds to start or scale their businesses remains forever. This is mainly because Indian investors are reluctant to taking risk of investing in startups. They actually feel comfortable funding established businesses rather than startups. Moreover, most startups lack a concrete financial track record, which recently introduced businesses cannot have. So, it becomes challenging to secure funding from banks and financial institutions. However, they have crowdfunding, venture capital, bootstrapping, etc. options to avail funds.
- Regulatory Hurdles
The Indian regulatory system is often perceived as the most difficult and time-consuming. Newly launched businesses have to come across several legal and regulatory hurdles. These can be associated with obtaining licenses and permits, registering their businesses, and complying with various laws and regulations. Lacking resources to hire legal compliance consultants can be daunting for these companies, especially when they do not have funds.
- Problems in Talent Acquisition
New companies require a skilled and talented workforce to execute their business plans successfully. However, hiring and retaining such talent can be a significant challenge for startups. If you consider the case of the technology and engineering sectors, hiring an experienced software engineer or workforce is no less than a nightmare. Many startups struggle to compete with established companies when it comes to salaries and benefits. Moreover, the lack of a robust startup culture in India means that many talented professionals prefer to work for established companies rather than startups.
- Inadequate Infrastructure
Infrastructure is critical for the growth and success of startups. However, India’s infrastructure, especially in tier 2 and tier 3 cities, is often inadequate. Poor transportation networks, unreliable power supply, and inadequate internet connectivity can significantly interrupt the operations of startups. This is especially true for technology startups that require high-speed internet, and a consistent power supply to operate smoothly. Even for hybrid work culture also, inadequate arrangement of basic requirements can never allow newly introduced companies to make profits.
- Stiff Competition
The Indian startup ecosystem is becoming increasingly competitive. These companies have to compete with big fish in the industry, and they can be established players that secure customers and market share. Moreover, the ease of starting a business has led to a rapid increase in the number of several copycat companies. It threatens the sustainability or existence of those companies that are opposite to innovative startups. Only unique products or services stand out in the market.
- Lack of Mentorship and Support
Mentorship and support are critical for the success of startups. However, many startups in India lack access to experienced mentors and support systems. This is especially true for startups in tier 2 and tier 3 cities, where the startup ecosystem needs more exposure and development. Moreover, the lack of a robust startup culture means that many companies struggle to find peers and communities that can offer support and guidance.
- Intellectual Property Rights (IPR) Issues
Protecting intellectual property rights (IPR) is crucial for new businesses, especially the ones in the technology and innovation sectors. However, India’s IPR regime is often considered weak. This happening makes it challenging for new companies to protect their innovations and ideas. The lengthy and costly legal procedures associated with IPR protection prove a significant hurdle for startups, especially those with limited financial resources.
- Limited Market Size
The Indian market is vast, but it can also be challenging for new entrepreneurs. Many startups fight hard to find a niche in the market, given the limited purchasing power of the Indian middle class. Moreover, the lack of a strong manufacturing ecosystem in India means that many new players have to rely on imports for raw materials and components. This practice makes it difficult to compete with established players.
Summary
Startups in India face several challenges that interrupt their growth and success. Addressing these challenges will require a concerted effort from the government, investors, and the startup ecosystem as a whole. By providing startups with adequate funding, regulatory support, infrastructure, and mentorship, India can create a vibrant and thriving startup ecosystem that can drive economic growth and job creation.