‘Startup mortality rate is 45-50%’
EDII-ASSOCHAM Study Identifies Emerging Areas
After the dot-com boom in the 1990s and early 2000s, the startup has been a new buzzword. However this boom has also started settling down – as many as 45% to 50% of the startups stumble right at the inception level, says ‘Entrepreneurs India: Gains & Misses,’ a background paper prepared by Entrepreneurship Development Institute of India (EDII) and the Associated Chambers of Commerce And Industry of India (ASSOCHAM). The paper was released to mark the World Entrepreneurs Day recently in Delhi.
According to the paper, the inception to seed stage sees the exit of about half of the ventures that have the average funding of $200,000-250,000. The number goes down as ventures mature. At the growth and expansion stage, the mortality rate is about 10% where the venture funding is about $25 million.
Sunil Shukla, the director of EDII, said that a number of factors are responsible for the trend, including lack of funds and scalability issues. “On the brighter side, a number of government and private initiatives are supporting new ideas and we see better-equipped ventures now,” he said. “Hand-holding is needed the most at the initial stage on multiple issues.”
Talking about Gujarat, Shukla said that the state has seen an emergence of startups in the manufacturing sector.
“We also have huge potential in terms of inter-institutional collaborations,” he said. “Why can’t a student entrepreneur get design feedback from NID and marketing/operational tips from IIM-A?”
The paper says that healthcare, education, and financial inclusion along with technology in sectors such as sanitation, agriculture, and energy are future areas for Indian Startups. In 2017, the highest funding was attracted by startups in hyperlocal/consumer services sector, enterprise tech, and e-commerce.
Comparing startup policies of different states, the paper advocates the amalgamation of good practices and also cited examples from countries such as the US, Canada, and Singapore – the countries with a high number of successful ventures.
Women, Student Entrepreneurs on rise:
The paper says that India at the moment ranks third in the world in terms of startup incubators/accelerators with 192 centers ahead of countries such as Israel, Of the total, 92 are with academic institutions, 65 with private entities, 20 with corporate and 15 with government organizations. Student entrepreneurs thus are getting an early platform, Kavita Saxena, a faculty member at EDII and a co-author of the paper, said that it’s a misnomer that women entrepreneurs are associated with specific areas. “About 21% of tech startups have women as partners. The number is 17% in education and 4% in healthcare,” she said, adding that women are also venturing out of family businesses.
India’s Startup Ecosystem
Bengaluru, Mumbai, Delhi NCR account for 68% of total startups.
Investment in startups – Approximately $13.7 bn in over 820 deals.
Major Areas of growth – Health tech 28%, Finance tech 31%, E-commerce – 13%
Number of active incubator/accelerator units – 192
Addition of new startups in 2017 – 1,000+