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Business Management

Kathryn Cave (India) - Are Indian Startups Going Chinese or Kenyan?

62% of US startups are rumoured to have Indian co-founders - but what about the startup scene in India itself? ‘The World Startup Report' on India, published on Tuesday, reveals a complete picture of the scene across the country. It starts by comparing India with China and shows that Indian infrastructure currently stands at Chinese 1990 levels. IPO exits are at 2000 levels. The internet is at 2006 levels. While mobile subscriber rates are roughly equal to China (but with far lower smartphone adoption). On top of this India has a fast growing market with limited competition.

James Gruber recently wrote for Forbes, "Buy India, Sell China". In this piece Gruber stated "Until recently, India saw itself as an emerging economic powerhouse, the next China so to speak. Those delusions of grandeur led to complacency and the end-result is that GDP growth has slumped to a ten-year low." However, he followed through with, "[Although] India has many problems, they're unlikely to get much worse from here. At 13x forward earnings, with a cyclically low earnings base, the India market looks reasonable value. India's rival, China, has far bigger problems, in my view."

Our own research, published in December, shows that optimism within India is still high. 57% do not feel it is failing despite widespread global negativity. In fact a huge amount of positive emphasis is placed on entrepreneurialism and the new breed of startups. As one Indian professional put it, "There are a huge number of people attempting to do startups. There is optimism amongst people. We are all clear that the way forward is by getting more educated and by looking at starting businesses."

 

Startups Wreck Marriage Chances

Against this backdrop ‘The World Startup Report' on India makes for an interesting read - if only as insight into the local culture of entrepreneurialism. One commenter from the Delhi startup audience said, "If you want to get married don't do a startup" whilst the presentation itself added, "It's a bad point on the matchmaking checklist, like being a struggling artist (without the glamour)". This is a fascinating social point, corroborated by one commentator on the TechCrunch story, "Getting married and prospective in-laws are a major issue in Indian Entrepreneurship circuit." Talvinder Singh, Founder of Tushky.com supplemented his point with a first-hand account: "World expects you to be some millionaire by now. 3 years is like the litmus test of survival for any startup. And that's when you are expected to marry. Well, a broke founder (ok, not really broke. Yet) of a crazy idea isn't a hot selling product, after all."

Maybe part of the problem for young tech startup founders in India is that the country has a high volume of traditional entrepreneurs who have already made a lot of money. These tend to be fairly risk averse sticking to traditional cash-flow businesses and family affairs, and stand rather at odds with the innovative "gap-in-the-market" startup dream. However, this is where India really excels.

 

Indians Excel at Creative Solutions

Problems associated with poor infrastructure are are so intense that burgeoning startups are leaping in to offer creative solutions. Google executive chairman Eric Schmidt is embroiled in his Asian tour at the moment including a visit to Bangalore (where 41% of startups are based). On Tuesday, he wrote an opinion piece for the ‘The Times of India' in which he stated, "The most striking Indian internet innovations won't come from big institutions or companies moving online, however. They will come from Indians solving local problems." He went on to cite the case of Redbus, which took the mess of multiple bus companies working across the country and provided an answer. Schmidt's conclusion to this was, "You don't have to aim for foreign markets to be successful. You just have to solve local problems in a way that's globally applicable."

Interestingly, these problems themselves seem to be a fundamental part of the Indian startup scene. Take "Indian time" - part driven in part by culture, part driven by traffic chaos - this leads to everything running anywhere between 15 minutes and two hours late. Yet strikingly, despite difficult conditions people seem generally content. This is a noteworthy cultural point and is perhaps in part down to the inefficient laid back approach?

 

Indian Expansion into Africa

So, to what extent can this surge of online expansion make India the new China? Economic factors aside, Indian culture has no similarity to its Chinese counterpart. For example, India imports a high volume of goods from China - despite being ripe for production itself. The ‘World Startup Report' believes this is because "Indians in general prefer to be ‘traders' than ‘makers'".

The one arena where comparisons can be made however is in African expansion. An article in Forbes on Tuesday looked at how India and Australia, not China, lead Asian M&A charge In Africa. The Telegraph of India stated that "India Inc's very best are in a race with Chinese companies to tap Africa as a growing resource supplier." Whilst Avantika Chilkoti on the FT blog wrote, "India, is eyeing Africa - and India's most prominent industrial house, Tata group, is leading the pack."

India already has huge cultural ties with the African continent and the Indian spirit of entrepreneurialism is no better typified than in the mass migration of Indians towards east Africa the last century. Vast swathes of Nairobi businesses, for example, are still owned by Indians. Perhaps now the Indian startup mentality, so clearly demonstrated abroad, is finally moving online and beginning to stay at home?

 

Kathryn Cave is Editor at IDG Connect

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