Most Indian Startups Create Jobs, Clone Western Ideas and Close Down Due to Lack of Funds

With India scaling its way up to become the third-largest startup ecosystem, the picture might seem rosy on the outside but accounts for further unemployment as more and more startups pull the curtains down.

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New Delhi: The Indian startup space is a throbbing job-generator, however, mere replication of Western ideas and lack of technical innovation is forcing venture capitalists to restrict funding , resulting in slow decay of entrepreneurial ambitions.

In a report by IBM Institute for Business Value and Oxford Economics, it was found that 90 percent of Indian startups fail within the first five years. And the most common reason is lack of innovation.

Despite the fact that market valuation of Indian startups has grown significantly over the past four years, the study, “Entrepreneurial India,” states that 77 percent of venture capitalists surveyed believe that Indian startups lack new technologies or unique business models.

With India scaling its way up to become the third-largest startup ecosystem, the picture might seem rosy on the outside but accounts for further unemployment as more and more startups pull the curtains down.

Meanwhile, India’s enthusiasm towards startups has taken a dent as well. Number of new internet and technology start-ups launched in the first nine months of 2017 slumped to 800 from more than 6,000 in all of 2016, according to data from Tracxn, a start-up tracker.

“Since 2015, as many as 1,503 startups have closed down in India. And the major reason is due to the replication of Western business models, and not lack of subsequent funding from the investors,” says Rishabh Lawania, founder of Xeler8, a market intelligence platform recently acquired by a Chinese venture capital firm. The highest number of failures were in logistics, e-commerce and food technology.

Experts are of the opinion that artificial intelligence machine learning have been adopted in retail and banking as well, but India remains to be a follower market. “What you see in the US today will start appearing here tomorrow,” said an expert.

US based think-tank Information Technology and Innovation Foundation (ITIF), in a survey in 2016, ranked India among the bottom of a list of 56 countries on global innovation. The ITIF study revealed that the country’s poor performance in developing human capital is mainly because of its failure in investing on education.