The startup saga

The startup saga

Boom in the bubble

The startup saga

Love it or hate it, you just can’t ignore it! There is no doubt that the sector which grabbed maximum eyeballs in 2015 was the business and entrepreneurial culture. From students turning CEOs  to startup events and hackathons, Bengaluru is no stranger to the startup culture.

   However, professionals now have begun to speculate and analyse the state of the startup ‘bubble’. Most feel that overvaluations, lack of core business values and lack of generating revenue are some threats to the startup story which can lead to the bubble  burst.

Satish Kataria, the founder of ‘Catapoolt’, says that ‘bubble’ is an exaggerated term and calls the phase of growth as one of consolidation, correction and noise in the market. “The rate at which start-ups are being funded has risen. Many have received pre-mature funding and the idea toppled over as their foundation was weak, which made it difficult for them to win over the market. The growth of this  rise will stabilise and filter out soon.”
 Shubham Roy, a professional at Amazon, also feels this rise across sectors is a positive trend as young entrepreneurs churn out fresh ideas to address every-day problems. “The growth, as of now, is still in the pre-natal stage so there is no question of a bubble or its burst just yet. Indian markets and economy are looking up.”

Vrushabh, founder of ‘Aarigo Online Service’, looks at losses and layoffs as a sure-shot sign that the bubble will burst. He says that many online start-ups haven’t yet reported their first-year profits and while companies may grow, their quality and profits aren’t. Another discouraging aspect of start-ups is their ability to increase middlemen, who aren’t required in service sectors that leverage very little technical knowledge. As a result, smart people do not-so-smart things adding little to innovation and prevent further growth, making India more import-dependent. It has also become difficult to provide sustainable growth in the primary sector when startups target only the service sector. Such trends have led experts to look into start-ups which have raised investments with higher valuations and are yet burning more cash without leading to revenue.

 Shubham adds, “Most start-ups fail in terms of guidance and mentorship. They lack in branding, sales and marketing strategy. The fear of failure is what is keeping the right people from entering the right start-up.”

And it is not just the entrepreneurs and employees who will be losing if startups fail, it’s the investors too, ones who have put their money where their mouths are!

Vrushabh says, “India has suddenly has become a place to generate ‘Unicorn startups’  but if compared to the valuation of their international peers, these will have to double their user metrics every year for a long period. Investors are investing on the basis of speculative future earnings which are wrongly predicted. Free funding has encouraged the start-ups to burn cash senselessly. Investors are overflowing the startups with excessive funding without looking properly at the sector and once again they are lured by a few stories of success and ignoring the failure stories.”

But despite such alarming changes, many don’t see a crash like the dotcom crisis. Ravindra, the owner of BHive, a co-working space says, “Both the situations are different. The 2008 crash was a systematic course correction whereas currently it is not a systematic one. Many Indian unicorns are dependent on the Indian economy, demography and growth story. However, startups need to focus on a scalable business model and prove to build it with lean resources. Start-ups should stay loyal to core business values. Spending should be in a way to build the core business, team, culture, technology and also to get customers.”

Vrushabh adds, “By burning enormous amounts of cash and calling it a customer acquisition and marketing strategy, startups are turning people into more deal-loyal users rather than brand-loyal users. Many times, app developers give out free discount coupons on every download. After that deal, nobody opens the app and many delete them. Users are not going to come back and there’s no way to calculate the number of deleted the apps. This is not the smart way to acquire customers and sale. The simple and most useful way to drive growth and capture more market share is to stay loyal with the market and use money wisely.” 

But if anything can come off as worth it from its many faces that India stares at today, it is the rise of competitive and better startups and the inspiration that younger ones will take to plan out sustainable business solutions that will be caused by the ‘bubble’. Ravindra says that evergreen ones in the energy/power, social entrepreneurship, food, healthcare, entertainment, technology and education will stay. Satish adds, “Such stages are learning phases where in India, one has always emerged out stronger. Strong ideas always get good funding.” And if not anything else, startups have definitely given way to a new hip, subculture. It has redefined the way we work, the spaces we work out of, the culture of workspaces and the quality of innovation and ideas.