Startups in India

India has created billion-dollar software services companies like TCS, Infosys, Wipro, but what about the product-based companies? We hardly remember any successful product companies originating from India. Even small countries like Finland can come up with billion-dollar product companies such as Skype. Why is India lagging behind? Well, India is definitely not lacking in skilled people because it’s the same Indians who have created companies like Hotmail, Rightworks, Exodus, Junglee and many more that are now headquartered in Silicon Valley. In fact, many of the startups in Silicon Valley are founded by Indians. Here are some possible reasons why;

Low Risk:
Unlike services companies, where revenues are pretty quick, product companies will need lots of research and development before the product is ready. Often, this will take 2-3 years or more. Sometimes after the product launched, based on market feedback, you may have to make drastic changes before scheduling a relaunch. This will undoubtedly further delay the revenue generation. Furthermore, many of these companies are shut down after 2-3 years without earning any revenue. In services companies, the revenues are generated from day one. Low risk and fast revenue generation may be one reason for people to concentrate on services rather than products. It is outsourcing that is a killer for Indian products.

Lack of Local Success:
Indians have heard about the success stories in Google, YouTube, Skype and so on, but have never seen or experienced the success themselves locally. We have witnessed many successful product companies like Microsoft, Intuit, Siebel, Lotus, Oracle, Adobe and so on with innovative staff members. Employees of these companies have come up with many new startups later in their career, on their own. India doesn’t have many such companies or role-model enterpreneurs to look up to for inspiration.

Hiring the Team:
Hiring the talented people for a startup is a challenging task in India because of a couple of reasons. First of all, people prefer to work for well-known companies like Microsoft or Google over some unknown XYZ startup. Secondly, it’s very difficult for startups to provide compensation matching the big companies. Unlike in Silicon Valley, where people prefer stocks over base pay, Indians prefer a straight base pay. The reason for this is once again due to the fact that most Indians have never witnessed locally, a Skype or a YouTube happening, with employees becoming millionaires through stocks.

Hard to get Funding:
It is very hard for ideas from enterpreneurs to get funded in India. Private equity firms are reluctant to take the risk of investing in Indian startups in early stages. Some startups do get funded once they are ready with the full demo, unlike in the US where people get funded in the very early stages.

Things are beginning to change very slowly, as some Indian startups like mGinger, Guruji and others are creeping up. On top of that, many US-based startups are opening their development centers in India. We are certainly hoping that some of the next generation software products will be coming from India.

This article is originally posted by me on Tech Persona.