6 ms·

The Silent Killers Of Startup Growth In India

59 points by thewarrior 13y ago

abhaga 13y ago
> (some) people negotiate all the corner cases in extreme detail, to the point where the law of diminishing returns kicks in pretty strongly. I have seen that. I once negotiated a contract going back and forth over 2 months. The total business generated by that contract? 5000 INR. < 100 USD. (Of course, I didn't know that while negotiating the contract.) I try not to do that now.
gnufied 13y ago
The articles touches on it, but as a startup Co founder one of the biggest problem in India is - access to Capital. Dharmesh Shah once said - "Indians are terribly practical" and it shows. VCs and even Angel investors stay away from a venture which isn't already turning in profit. Sure, there is a funding once you are making good chunk of money, but for many startups it is too late already.
- kamaal 13y ago
  Also the M&A acquisition scene isn't too good. If you want a exit out of your start up its not easy. So its either try until your die, or keep trying.
  - tekme 13y ago
    Agreed. But actually some solutions do exist to solve this problem. Can perhaps help. But won't right here as I'm new user and not sure exactly of posting rules.
khitchdee 13y ago
There's a difference in the quality of life between India and America. If you're starting up in India, you have accepted this difference. Correspondingly, there are differences in the operational reality you face in India as a startup trying to grow. The systems in general work differently than in America. At the same time, if you push through you get to stay on top of your domain a lot longer for that very same reason. Above all, it's a lot cooler working at a startup or starting your own company than working at a big established corporate in India. The jobs available are still not that great. Most of the work at Indian corporates is the second rate work the cutting edge doesn't want to mess with and therefore offloads. This is why there been a boom in India's startup scene in the last five years.
bharathwaaj 13y ago
"Relationships, not contracts, govern deals." One of the reasons why western companies find it difficult to crack and enter the Indian market.
- shortsightedsid 13y ago
  Not necessarily. The article as argues that Brands play a higher role in India. That's why some products succeed wildly in India as opposed to other. Take cars - Honda, Toyota are successful but where are the Peugeots and Citreons? Renault is slowly building but that's nothing compared to what the Japanese brands have.
kamaal 13y ago
>>Lack of trust This is something I can attest to. As some one who is starting up on the side while having a megacorp job. I see that people here in India somehow expect a lot of things to come for free, I've had serious problems receiving payments. Not just freelancing and doing projects on the side but even big companies have this attitude of considering offering an employment as doing a favor. And this attitude is something deeply ingrained in our culture. A bit part of this is because even until recently, being rich was all about cheating some way. Jobs were all about working for a land lord in some fields, or having a small time shop selling groceries or at most stuff like shoes, or clothes. The only way out was two areas engineering and medicine. For a long time and to a very great extent now those were the only two areas where you could make big money as some one from middle class. There fore when it comes to a definition of a job. People still tend to think of those lifelong employment at some government set up or at most a factory worker. In India most people have a difficult time understanding money can be made non-linear to the efforts spent. We are still stuck in the idea you get paid x rs/hour or y rs/month. And if that is not enough we have some kind of enjoyment in making glory out of poverty. Rich = evil, poor = godly. More worse, if you are rich or trying to get rich, People throw in this 'happiness doesn't come from money' card. Every other attempt is made to keep a person in a constant state of mediocrity. People who try to break out of this vicious cycle are automatically termed as 'greedy' and 'selfish', In other words if you promise to stay poor as them, all is fine. Silently they tell you - 'How dare you try to be different than us?' Some people are just plain afraid, they or there parents spend a lot of effort getting somewhere in life. And they don't just want to throw away all that by failing doing start ups. Some are afraid of ridicule. Some are just lazy. It will take some time to break these assumption/rules about living life. Regardless of this, many Indians now realize all this are making a lot progress. Much wealth can be created as genuine competition is practically non existent.
- markdown 13y ago
  > Every other attempt is made to keep a person in a constant state of mediocrity. People who try to break out of this vicious cycle are automatically termed as 'greedy' and 'selfish', In other words if you promise to stay poor as them, all is fine. http://en.wikipedia.org/wiki/Crab_mentality http://en.wikipedia.org/wiki/Crab_mentality http://en.wikipedia.org/wiki/Tall_poppy_syndrome http://en.wikipedia.org/wiki/Tall_poppy_syndrome
tn13 13y ago
It is always very simple to come up with these kind of post-hoc explanations. Not that these are false but they are not certainly "killers". Compared to say United States, Indian middle class and even lower middle class shows tremendous resilience. I am sure these kind of obstacles are not that big. I feel the real obstacle is a totally dysfunctional government and absence of law.
- kamaal 13y ago
  >>Indian middle class and even lower middle class shows tremendous resilience. No, they live a life of silent desperation. After some time you just get institutionalized to your state.
statictype 13y ago
(some) people misrepresent themselves materially without any consequences (eg overselling). (some) founders focus on control at the expense of value creation. potential buyers have a hard time parting with payment details or paying for off-the-shelf software. (some) people negotiate all the corner cases in extreme detail, to the point where the law of diminishing returns kicks in pretty strongly. trust gap between regulators, law enforcement and business. trust gap between promoters (aka founders) and investors and potential misalignment on timelines and strategy. (some) government and companies focus on protecting themselves from the 1% of customers who are gaming the system at the expense of the 99% remaining customers. Aren't these problems there everywhere ? Except the one about trust gap between regulators, law enforcement and business? For ex, is 'misrepresentation' really a problem that is specific to India?
- intended 13y ago
  It isn't about the binary presence of these problem but the nature of the frequency and overlap.
dkhare 13y ago
Thanks for all the comments. I wanted to write the post to surface some of the environmental issues, certainly did not mean it as a negative rant. I think there are any good companies and startups here in India working in an early eco-system. Lots more to come out of here over the next decade.
varunkho 13y ago
Risk aversion – fear of losing what you have earned by hard-work is the key here. The attitude prevails in families, customers, investers and even in aspiring entrepreneurs. Even if they trust you, they don't want to bet on something that has a risk of failing. The attitude has developed over the many years due to the dismal socio-economic conditions and is completely justified. Until recently a successful business is a lottery that only a few could get either by many years of perseverance or by being lucky to have been born in a wealthy family. We not only need individual successes but these should be more visible similar to what we see in bollywood/cricket and people will start appreciating the potential on a wider scale.
architgupta 13y ago
I am from a "business" family in India: This means, most of my relatives run small and large businesses. Risk and entrepreneurship is considered normal and a desirable thing to do. Due to this I know a lot of types of businesses and get access to data of their revenues and profitability. The most profitable businesses I have seen built in the past 5 years, are brick and mortar, infrastructure and real estate businesses. These are not VC funded, or typical for the HN crowd. These are very offline businesses, built on angel capital (friends and family), then institutional bank loans and then directly public money via small IPOs at the best outliers. A few of these businesses make $100MN+ revenues and the scenarios in which they reached here, was the Government + private contractor nexus. Privileged access to information and contracts is the only case where I have seen hockey stick growths of revenue in India. Most of the profitability comes from "cutting corners". These businessmen/women stay off the public radar, typically run massively profitable businesses. Most of them wouldn't consider going to a VC. Private Equity, sometimes yes. So, in view, its a great time to be in India and to build infrastructure projects, brick and mortar things. A "relationship" with the Government officials is almost a necessary condition to get the contracts. I don't know how honest you can remain in this business, but I have seen so many examples of real startup like hockey stick growth. Hustlers is the word I can think of people who succeed in this type of environment.
- samspenc 13y ago
  From my experience, there's quite a bit of difference b/w North and South India. The North encourages entrepreneurship, while the South's family structure favors "stable" jobs (doctors, engineers, etc). So you see a lot of founders coming from North India, and a lot of engineers coming from the South. Of course, I'm just generalizing this, its not a hard and fast rule, but something I've noticed.
- hpagey 13y ago
  Real estate businesses in India is the most corrupt type of business. A lot of black money is laundered through these businesses. You also need special relationships with corrupt politicians and sometimes the underworld to make this business successful. If as a entrepreneur you are OK with this, then yes its a good business to be in.
denzil_correa 13y ago
One of the successful startups in India (Flipkart - An Amazon clone), a couple of days back shut down it's digital music store Flyte [0]. Here's the statement by the Head of Digital Media Payments “We have realized that the music downloads business in India will not reach scale unless several problem areas such as music piracy and easy micro-payments etc are solved in great depth. Which is why, we feel that at present, it makes sense to take a step back from Flyte MP3s and revisit the digital music market opportunity at a later stage.” It gives some insight on the issues with digital music market in India. Some of it may be even applicable (or already included in this article) for other startups too. The keywords being "piracy" (free loaders) and payment technology constraints (micro payments etc.). [0] http://www.nextbigwhat.com/flyte-mp3-shutdown-297/ http://www.nextbigwhat.com/flyte-mp3-shutdown-297/
- nikhilpahwa 13y ago
  I've explained why http://www.medianama.com/2013/05/223-why-flipkart-shut-flyte-music/ http://www.medianama.com/2013/05/223-why-flipkart-shut-flyte... after speaking with several people involved in the deals with flyte (from the label site as well as flipkart) I don't buy this reasoning from Flipkart: they knew what they were getting into when they started Flyte - they had to change consumer behavior, piracy deal with payment issues, work with a really myopic music industry looking to leech every potential partner. It's just that they were in a rush to launch the business and got it wrong from the get-go. Paying minimum guarantees was a bad idea, and then they didn't back their investment with marketing support. They're willing to burn money to grow their physical goods business, but not willing to support the digital goods business. Shutting it down in just a year is ridiculous. these things take time to be built out, to build consumer traction. The institution that Flipkart.com is wasn't built in a year. There's no reason why Flyte should have been expected to be.
known 13y ago
https://en.m.wikipedia.org/wiki/Caste_system_in_india https://en.m.wikipedia.org/wiki/Caste_system_in_india seeded hatred and distrust among people in India for the past 3000 years. http://www.firstpost.com/world/painting-india-red-why-the-global-racism-map-is-wrong-789019.html http://www.firstpost.com/world/painting-india-red-why-the-gl... You either collude/bribe to get things done in India. http://business.rediff.com/report/2009/sep/24/indians-among-most-corrupt-while-doing-business-abroad.htm http://business.rediff.com/report/2009/sep/24/indians-among-...
outworlder 13y ago
> It is also quite stunning how many times people who have signed employment contracts do not show up on their first day of work What? Are employment contracts that useless?
- peterjancelis 13y ago
  I think it happens in more cultures. A partner at Deloitte Belgium once told me he expects 10% no-shows in his division for new university graduates. (The kind of people who sign a job offer and then try to find a job they like better.)
new_92 13y ago
I tried to restrain myself from commenting ,but I really need to add another point regarding this . There is an even more silent and equally important factor that prevents India's young folks from experimenting or trying to do more meaningful work . Nobody talks about this , but there is enormous sexual frustration among Indian youth . I could explain more about it , but I don't want to pollute this thread with a tangential discussion . If you are interested , please have a look at this http://goo.gl/xS7q1 http://goo.gl/xS7q1 answer on quora . I'm new to HN , please forgive me if this comment is not in line with HN guidelines. Disclaimer(or is it a Note?) : The quora answer I've linked above was written by me.
known 13y ago
Any type of hegemony will have awkward repercussions and collateral damage. https://en.m.wikipedia.org/wiki/Bania_%28caste%29 https://en.m.wikipedia.org/wiki/Bania_%28caste%29
tekme 13y ago
Good to see something written about "silent" factors. Silent Killers of Startup Growth in India are no different from "Grownups" growth in India. All businesses operate in the same environment. "Smart Startups" would factor in all factors including environment around them.
known 13y ago
It's only going to get worse in the future. Tell https://en.m.wikipedia.org/wiki/Bania_%28caste%29 https://en.m.wikipedia.org/wiki/Bania_%28caste%29 people in India to take their caste share of land and go build their own nation as per https://en.m.wikipedia.org/wiki/Communal_Award https://en.m.wikipedia.org/wiki/Communal_Award

59 points by thewarrior 13y ago

> (some) people negotiate all the corner cases in extreme detail, to the point where the law of diminishing returns kicks in pretty strongly. I have seen that. I once negotiated a contract going back and forth over 2 months. The total business generated by that contract? 5000 INR. < 100 USD. (Of course, I didn't know that while negotiating the contract.) I try not to do that now.

gnufied 13y ago

The articles touches on it, but as a startup Co founder one of the biggest problem in India is - access to Capital. Dharmesh Shah once said - "Indians are terribly practical" and it shows. VCs and even Angel investors stay away from a venture which isn't already turning in profit. Sure, there is a funding once you are making good chunk of money, but for many startups it is too late already.

kamaal 13y ago
Also the M&A acquisition scene isn't too good. If you want a exit out of your start up its not easy. So its either try until your die, or keep trying.
- tekme 13y ago
  Agreed. But actually some solutions do exist to solve this problem. Can perhaps help. But won't right here as I'm new user and not sure exactly of posting rules.

khitchdee 13y ago

There's a difference in the quality of life between India and America. If you're starting up in India, you have accepted this difference. Correspondingly, there are differences in the operational reality you face in India as a startup trying to grow. The systems in general work differently than in America. At the same time, if you push through you get to stay on top of your domain a lot longer for that very same reason. Above all, it's a lot cooler working at a startup or starting your own company than working at a big established corporate in India. The jobs available are still not that great. Most of the work at Indian corporates is the second rate work the cutting edge doesn't want to mess with and therefore offloads. This is why there been a boom in India's startup scene in the last five years.

bharathwaaj 13y ago

"Relationships, not contracts, govern deals." One of the reasons why western companies find it difficult to crack and enter the Indian market.

shortsightedsid 13y ago
Not necessarily. The article as argues that Brands play a higher role in India. That's why some products succeed wildly in India as opposed to other. Take cars - Honda, Toyota are successful but where are the Peugeots and Citreons? Renault is slowly building but that's nothing compared to what the Japanese brands have.

kamaal 13y ago

>>Lack of trust This is something I can attest to. As some one who is starting up on the side while having a megacorp job. I see that people here in India somehow expect a lot of things to come for free, I've had serious problems receiving payments. Not just freelancing and doing projects on the side but even big companies have this attitude of considering offering an employment as doing a favor. And this attitude is something deeply ingrained in our culture. A bit part of this is because even until recently, being rich was all about cheating some way. Jobs were all about working for a land lord in some fields, or having a small time shop selling groceries or at most stuff like shoes, or clothes. The only way out was two areas engineering and medicine. For a long time and to a very great extent now those were the only two areas where you could make big money as some one from middle class. There fore when it comes to a definition of a job. People still tend to think of those lifelong employment at some government set up or at most a factory worker. In India most people have a difficult time understanding money can be made non-linear to the efforts spent. We are still stuck in the idea you get paid x rs/hour or y rs/month. And if that is not enough we have some kind of enjoyment in making glory out of poverty. Rich = evil, poor = godly. More worse, if you are rich or trying to get rich, People throw in this 'happiness doesn't come from money' card. Every other attempt is made to keep a person in a constant state of mediocrity. People who try to break out of this vicious cycle are automatically termed as 'greedy' and 'selfish', In other words if you promise to stay poor as them, all is fine. Silently they tell you - 'How dare you try to be different than us?' Some people are just plain afraid, they or there parents spend a lot of effort getting somewhere in life. And they don't just want to throw away all that by failing doing start ups. Some are afraid of ridicule. Some are just lazy. It will take some time to break these assumption/rules about living life. Regardless of this, many Indians now realize all this are making a lot progress. Much wealth can be created as genuine competition is practically non existent.

markdown 13y ago
> Every other attempt is made to keep a person in a constant state of mediocrity. People who try to break out of this vicious cycle are automatically termed as 'greedy' and 'selfish', In other words if you promise to stay poor as them, all is fine. http://en.wikipedia.org/wiki/Crab_mentality http://en.wikipedia.org/wiki/Crab_mentality http://en.wikipedia.org/wiki/Tall_poppy_syndrome http://en.wikipedia.org/wiki/Tall_poppy_syndrome

tn13 13y ago

It is always very simple to come up with these kind of post-hoc explanations. Not that these are false but they are not certainly "killers". Compared to say United States, Indian middle class and even lower middle class shows tremendous resilience. I am sure these kind of obstacles are not that big. I feel the real obstacle is a totally dysfunctional government and absence of law.

kamaal 13y ago
>>Indian middle class and even lower middle class shows tremendous resilience. No, they live a life of silent desperation. After some time you just get institutionalized to your state.

statictype 13y ago

(some) people misrepresent themselves materially without any consequences (eg overselling). (some) founders focus on control at the expense of value creation. potential buyers have a hard time parting with payment details or paying for off-the-shelf software. (some) people negotiate all the corner cases in extreme detail, to the point where the law of diminishing returns kicks in pretty strongly. trust gap between regulators, law enforcement and business. trust gap between promoters (aka founders) and investors and potential misalignment on timelines and strategy. (some) government and companies focus on protecting themselves from the 1% of customers who are gaming the system at the expense of the 99% remaining customers. Aren't these problems there everywhere ? Except the one about trust gap between regulators, law enforcement and business? For ex, is 'misrepresentation' really a problem that is specific to India?

intended 13y ago
It isn't about the binary presence of these problem but the nature of the frequency and overlap.

dkhare 13y ago

Thanks for all the comments. I wanted to write the post to surface some of the environmental issues, certainly did not mean it as a negative rant. I think there are any good companies and startups here in India working in an early eco-system. Lots more to come out of here over the next decade.

varunkho 13y ago

Risk aversion – fear of losing what you have earned by hard-work is the key here. The attitude prevails in families, customers, investers and even in aspiring entrepreneurs. Even if they trust you, they don't want to bet on something that has a risk of failing. The attitude has developed over the many years due to the dismal socio-economic conditions and is completely justified. Until recently a successful business is a lottery that only a few could get either by many years of perseverance or by being lucky to have been born in a wealthy family. We not only need individual successes but these should be more visible similar to what we see in bollywood/cricket and people will start appreciating the potential on a wider scale.

architgupta 13y ago

I am from a "business" family in India: This means, most of my relatives run small and large businesses. Risk and entrepreneurship is considered normal and a desirable thing to do. Due to this I know a lot of types of businesses and get access to data of their revenues and profitability. The most profitable businesses I have seen built in the past 5 years, are brick and mortar, infrastructure and real estate businesses. These are not VC funded, or typical for the HN crowd. These are very offline businesses, built on angel capital (friends and family), then institutional bank loans and then directly public money via small IPOs at the best outliers. A few of these businesses make $100MN+ revenues and the scenarios in which they reached here, was the Government + private contractor nexus. Privileged access to information and contracts is the only case where I have seen hockey stick growths of revenue in India. Most of the profitability comes from "cutting corners". These businessmen/women stay off the public radar, typically run massively profitable businesses. Most of them wouldn't consider going to a VC. Private Equity, sometimes yes. So, in view, its a great time to be in India and to build infrastructure projects, brick and mortar things. A "relationship" with the Government officials is almost a necessary condition to get the contracts. I don't know how honest you can remain in this business, but I have seen so many examples of real startup like hockey stick growth. Hustlers is the word I can think of people who succeed in this type of environment.

samspenc 13y ago
From my experience, there's quite a bit of difference b/w North and South India. The North encourages entrepreneurship, while the South's family structure favors "stable" jobs (doctors, engineers, etc). So you see a lot of founders coming from North India, and a lot of engineers coming from the South. Of course, I'm just generalizing this, its not a hard and fast rule, but something I've noticed.
hpagey 13y ago
Real estate businesses in India is the most corrupt type of business. A lot of black money is laundered through these businesses. You also need special relationships with corrupt politicians and sometimes the underworld to make this business successful. If as a entrepreneur you are OK with this, then yes its a good business to be in.

denzil_correa 13y ago

One of the successful startups in India (Flipkart - An Amazon clone), a couple of days back shut down it's digital music store Flyte [0]. Here's the statement by the Head of Digital Media Payments “We have realized that the music downloads business in India will not reach scale unless several problem areas such as music piracy and easy micro-payments etc are solved in great depth. Which is why, we feel that at present, it makes sense to take a step back from Flyte MP3s and revisit the digital music market opportunity at a later stage.” It gives some insight on the issues with digital music market in India. Some of it may be even applicable (or already included in this article) for other startups too. The keywords being "piracy" (free loaders) and payment technology constraints (micro payments etc.). [0] http://www.nextbigwhat.com/flyte-mp3-shutdown-297/ http://www.nextbigwhat.com/flyte-mp3-shutdown-297/

nikhilpahwa 13y ago
I've explained why http://www.medianama.com/2013/05/223-why-flipkart-shut-flyte-music/ http://www.medianama.com/2013/05/223-why-flipkart-shut-flyte... after speaking with several people involved in the deals with flyte (from the label site as well as flipkart) I don't buy this reasoning from Flipkart: they knew what they were getting into when they started Flyte - they had to change consumer behavior, piracy deal with payment issues, work with a really myopic music industry looking to leech every potential partner. It's just that they were in a rush to launch the business and got it wrong from the get-go. Paying minimum guarantees was a bad idea, and then they didn't back their investment with marketing support. They're willing to burn money to grow their physical goods business, but not willing to support the digital goods business. Shutting it down in just a year is ridiculous. these things take time to be built out, to build consumer traction. The institution that Flipkart.com is wasn't built in a year. There's no reason why Flyte should have been expected to be.

known 13y ago

https://en.m.wikipedia.org/wiki/Caste_system_in_india https://en.m.wikipedia.org/wiki/Caste_system_in_india seeded hatred and distrust among people in India for the past 3000 years. http://www.firstpost.com/world/painting-india-red-why-the-global-racism-map-is-wrong-789019.html http://www.firstpost.com/world/painting-india-red-why-the-gl... You either collude/bribe to get things done in India. http://business.rediff.com/report/2009/sep/24/indians-among-most-corrupt-while-doing-business-abroad.htm http://business.rediff.com/report/2009/sep/24/indians-among-...

outworlder 13y ago

> It is also quite stunning how many times people who have signed employment contracts do not show up on their first day of work What? Are employment contracts that useless?

peterjancelis 13y ago
I think it happens in more cultures. A partner at Deloitte Belgium once told me he expects 10% no-shows in his division for new university graduates. (The kind of people who sign a job offer and then try to find a job they like better.)

new_92 13y ago

I tried to restrain myself from commenting ,but I really need to add another point regarding this . There is an even more silent and equally important factor that prevents India's young folks from experimenting or trying to do more meaningful work . Nobody talks about this , but there is enormous sexual frustration among Indian youth . I could explain more about it , but I don't want to pollute this thread with a tangential discussion . If you are interested , please have a look at this http://goo.gl/xS7q1 http://goo.gl/xS7q1 answer on quora . I'm new to HN , please forgive me if this comment is not in line with HN guidelines. Disclaimer(or is it a Note?) : The quora answer I've linked above was written by me.

known 13y ago

Any type of hegemony will have awkward repercussions and collateral damage. https://en.m.wikipedia.org/wiki/Bania_%28caste%29 https://en.m.wikipedia.org/wiki/Bania_%28caste%29

tekme 13y ago

Good to see something written about "silent" factors. Silent Killers of Startup Growth in India are no different from "Grownups" growth in India. All businesses operate in the same environment. "Smart Startups" would factor in all factors including environment around them.

known 13y ago

It's only going to get worse in the future. Tell https://en.m.wikipedia.org/wiki/Bania_%28caste%29 https://en.m.wikipedia.org/wiki/Bania_%28caste%29 people in India to take their caste share of land and go build their own nation as per https://en.m.wikipedia.org/wiki/Communal_Award https://en.m.wikipedia.org/wiki/Communal_Award