Why Is It So Hard To Start A Business in India?

I’ve been in the startup trenches in India for the last three years. I’m currently the CEO of Findable.in, a location-based product search platform based in India, and I’m also the Founding Partner of India Internet Group, an early stage venture capital fund based in Mumbai, Delhi and New York. I think this is the best time ever to be an entrepreneur in India. However, it’s also an incredibly difficult journey.

In this post, I explain what makes starting a business in India so hard. But don’t be discouraged! My next post will explain why this is actually such a great time to be an entrepreneur in India.

An Incredibly Difficult Journey…

  1. Poor labor market. It’s tough to hire great people in India to work at startups. This is changing, but many smart folks don’t want to join your startup for a low salary, especially since people worry that equity or options won’t pay off in the long run. As a result, the top layer in Indian startups is world-class, but then you see a big dip in the middle and lower levels. While some of the startup founders in India are as motivated and talented as their counterparts in the U.S., motivating employees is much harder in India than it is in the U.S. This hurts the startup’s productivity levels as well as its ability to innovate and scale.
  2. Red tape. India has an incredible way of bogging you down with procedural, compliance and other such issues. As a CEO, I am spending way more time dealing with accounting, legal, and corporate compliance-related issues than I expected. At least twice a week, I have to sit down with our Chartered Accountant or our lawyers or the Company Secretary to ensure that we have met the TDS (Tax Deducted at Source) requirements, completed our compliance with the RoC (Registrar of Companies), etc. Combine that with the time spent motivating un-motivated employees, and some weeks, you have no idea where your week went!
  3. Lack of quality mentors. The quantity and quality of mentors in India (with the possible exception of Bangalore) is not quite up to the level of what you would find in Silicon Valley or other startup hubs such as New York, Philly or Boston.  Not entire surprising, since tech entrepreneurship is still in its infancy in India. The oldest successful tech startup founders are probably 10 years old in the industry, but really the bulk of the companies have been founded since 2008. The founders of these companies will likely become, in a few years, the kind of investors and mentors that Silicon Valley boasts of. Already, some successful entrepreneurs – the likes of Naveen Tiwari (InMobi), Kunal Bahl (Snapdeal, WG’06), Amar Goel (Komli), K. Ganesh (Tutorvista), Sanjeev Bikchandani (Infoedge, Naukri.com) – are starting to become active investors and mentors. India could use a lot more such mentors and investors.
  4. Slow consumer traction. The Indian internet consumer is also just learning how to consume the internet, or mobile apps for that matter. This means that customer traction is often very slow, and requires a lot of customer education. For example, OLX and Quikr – two prominent classified sites in India – as well as eBay have had to spend a lot of time, effort and money in educating the Indian consumer on how to sell old products online. Similarly, for my first startup, EkSMS.com, it took us a long time to educate restaurants and bars on using the SMS or web platforms for their marketing. The Indian consumer hasn’t quite displayed the same kind of early adopter characteristics as users in California might have.
  5. Problems getting paid. Moreover, the Indian consumer (or the Indian small business) is not very willing to shell out cash quite yet, so recurring credit card subscription businesses (the likes of Netflix, etc.) as well as others that require consumers or small businesses to pay are very hard to build here. With EkSMS.com and Findable.in, we have often had to run after our customers to get longstanding bills cleared. This also requires Indian startups to be even more frugal in their initial stages than their Silicon Valley counterparts.

These challenges are very real, and any entrepreneur interested in starting a company in India should be aware of them. However, I can’t say enough times that this is truly the best time to be an entrepreneur in India. Stay tuned for my next post, when I explain exactly why.

 

This post was originally published on Wharton Entrepreneurship’s blog: http://beacon.wharton.upenn.edu/entrepreneurship/2014/02/why-is-it-so-hard-to-start-a-business-in-india/ 

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