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Framework for Social Change through Startups in India

Article in International Journal of Civic Engagement and Social Change · January 2015
DOI: 10.4018/IJCESC.2015010103

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30 International Journal of Civic Engagement and Social Change, 2(1), 30-42, January-March 2015

Framework for Social Change

through Startups in India
Neeta Baporikar, HP-GSB, Namibia and Doctoral Guide, University of Pune, India

ABSTRACT
Capacity of a country to develop new science and transform it into innovative technologies and ramp them
into successful, sustainable business that generate revenue, high-quality jobs and promote development is of
paramount importance in today’s world. Startups are an effective way of doing this. A startup is a temporary
organization in search of a scalable, repeatable, profitable business model and a small startup founded by
two or three entrepreneurs can produce and test the feasibility of tens of possibilities for a new business
idea. Through grounded research and content analysis the objective is to have an overview of contemporary
perspective on startups in India, enhance understanding of startup ecosystems and recognize the framework
for social change taking shape due to Indian startups contribution to the national economy. The paper also
attempts to understand the key success factors and provides commandments to further foster startups to
optimize the social change.

Keywords: Change, Enterprises, Entrepreneur, Framework, India, Policy, Social, Startups, Venture

INTRODUCTION
Since independence to the eighties, Indian policy makers emphasized on the socialist model of
development and during that time span, the Government provided a favourable condition for the
State Owned Enterprises (SOEs) in India and the then political leadership levelled them as ‘Temple
of Modern India’. In this backdrop, the Union Government pronounced some policy measures in
order to accelerate industrial growth. But the small scale industries remained ignored at the large
extent. However, things changed in nineties. With the opening up of economy and the wave of
information technology there was realization that the driving force in the modern economy in the
foreseeable future, is entrepreneurship. A research study by International Finance Corporation
(IFC) stated that the Micro, Small and Medium Enterprise sector is crucial to India’s economy.
There are 29.8 million enterprises in various industries, employing 69 million people. The sec-
tor includes 2.2 million women-led enterprises (7.4 percent) and 15.4 million rural enterprises
(51.8 percent). In all, the MSME sector accounts for 45 percent of Indian industrial output and
40 percent of exports. Although 94 percent of MSMEs are unregistered, the contribution of the

DOI: 10.4018/IJCESC.2015010103

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 International Journal of Civic Engagement and Social Change, 2(1), 30-42, January-March 2015 31

sector to India’s GDP has been growing consistently at 11.5 percent a year, which is higher than
the overall GDP growth of 8 percent (MSME, 2012)
Entrepreneurs are meeting our economic needs through the creation of thousands of new
businesses each year. While larger corporations have instituted extensive “downsizing” or
“rightsizing” programs, job creation and economic growth has become the domain of the new
ventures and the entrepreneurs who create them. A great deal is known about the characteristics
of entrepreneurs and the motives that have urged them to set up a business venture. Previous
research has examined the importance of various demographic variables such as personality,
human capital and ethnic origin. Marital status, education levels, family size, employment status
and experience, age, ethnicity, gender, socioeconomic status, religion and personality traits have
all been considered to varying degrees. However, the picture which emerges from this research
is somewhat “fuzzy” due to differences in testing procedures, sampling and country-specific
factors. Furthermore, virtually all previous studies focused on entrepreneurs actually working in
a new business, and have ignored persons who still are in the process of starting a new business.
This is a serious omission. In order to gain a comprehensive picture of entrepreneurship (and
of the barriers and triggers affecting start-ups), both groups must be studied. It is not sufficient
enough to approach only those who have fulfilled their objectives. This paper brings forth a
contemporary policy perspective, by focusing on this other group – start-ups. After a discussion
of current Indian scenario and what makes India unique, the paper delves into Indian startup
prospects, discusses the startups ecosystems, the landscape, challenges, need to understanding
startups: good vs. bad, the key success factors. Commandments for startup success precede the
conclusion.

CURRENT INDIAN SCENARIO

India is changing rapidly. The population is flooding online and numerous businesses are
springing up to service them. Some will succeed and some will fail. But maybe those who can
conquer this fast expanding virtual India really can take on the world Baporikar (2014b). More
continent than country, India ranges from the frozen summits of the Himalayas in the north to
the verdant coconut groves of Kerala in the south. While the people that span this sprawling 1.3
million square mile land mass are just as varied. Now as this vast, disparate population moves
online, hosts of companies are leaping forward to offer every service they need. These run from
the ecommerce giants rising up to provide goods, to the tide of payment and delivery companies
which make all this possible. They cover the new organizations that are helping to empower the
previously disenfranchised. And they include innovative individuals who are spotting business
and consumer gaps in the market and trying to plug them as fast as possible. For any commercial
organization, there is everything to play for, because those who can take on the complexities of
India may well be equipped to tackle the world.
In February 2014, the Economic Times of India wrote: “For nearly a year now, some of the
world’s most renowned investors have poured in big money to get a slice of the action in India,
one of the fastest growing markets for ecommerce.” The Times of India reported in November,
2014: “Internet penetration in the country may not have crossed 16% of the population yet, but
in absolute numbers this percentage works out to nearly 10 times the population of Australia.”
Based on findings from the Internet and Mobile Association of India, this provides a powerful
indication of the potential of consumer growth to come. The lack of credit cards and bank ac-
counts being used by consumers, especially in rural India, has proved a bit of a problem. Yet
mobile phones are being used to push people into banking channels. The buying behaviour in

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32 International Journal of Civic Engagement and Social Change, 2(1), 30-42, January-March 2015

India is different from other countries, but has a lot in common with other emerging markets. In
the US, it is seen, that people go to physical stores and then look at how they can buy it cheaper
online. But in India, people look at a product online and then they want to figure out, ‘how they
can get it nearer to themselves?’ Yet for many new businesses, the sheer size and disparity of
the country makes India as much of a challenge as it is an opportunity.

What Makes India Unique?

The roots of India’s current economic systems extend back to the colonial rule and its autocratic
fragmented structure. The country then was made to forcefully serve as a market to its colonial
bosses and their industrial products. Independence in 1947 brought many changes, but the country
did not have to start “from scratch”. The foundations of the today’s legal, financial, educational,
bureaucratic governance systems were inherited. Even the roots of publicly funded research
structures, which have grown large today, date back to the colonial days. However, one key area
of change following independence involved the adoption of a closed economy that relied heavily
on central planning, restricted imports, and nationalization of industries. Not until 1991 did India
open its economy, which led to real competitiveness and a need for innovation in all industries.
India today is a vast democratic country with a population of over 1.2 billion people with diverse
ethnicities, religions, and languages. Nearly 70% of Indians live in rural areas (Census of India,
2011), and over past 20 to 30 years there has been a continuous flow of people from villages
towards cities, mainly in search of work (Vinayakam & Sekar, 2013). The Indian economy is
mostly based on agriculture, which depends on the unpredictable South-West monsoon. Given
the large population, it is a considerable task for the government to ensure adequate and afford-
able supplies of food, drinking water, clothing, housing, education, and healthcare. The people
of India, especially the young, crave employment, but then there is a limitation to employment
opportunities offered by the various sectors of economy. There is a realization that, “to sustain
rapid growth and alleviate poverty, India needs to aggressively harness its innovative potential,
relying on innovation-led, rapid, and inclusive growth to achieve economic and social trans-
formation” (Dutz, 2007). The innovative potential of the Indian youth population, if supported
through an effective innovation ecosystem, holds potential for developing entrepreneurship and
providing growth and job opportunities that India needs.
Three main conceptual approaches to entrepreneurship are found in the literature. The
first - a functional approach - is concerned with the dynamic actors that make key decisions on
investment, production, innovation, location, research and development. From this perspective,
entrepreneurship is a psychological trait referring to dynamism, creativity and originality. This
approach also includes managers of multi-national firms, state enterprises or non-profit orga-
nizations, and a variety of dynamic entrepreneurs within organizations. The second approach
focuses on the firm as the key economic actor. The firms included here are owner-operated
firms, incorporated joint stock companies, state-owned firms’ joint ventures and subsidiaries of
multinationals. These firms are the units that make the key decisions on investment, on branch-
ing into new activities or sectors, or relocating to other countries. There exists a large literature
on firm-level behaviour in developing countries which examine firm characteristics, including
their economic performance, innovative performance, capabilities and business strategies (Naudé,
W.A. 2011). The third conceptual approach focuses on owner-operated enterprises. Within this
approach, the entrepreneur is the person who is both owner and is actively involved in run-
ning the business. This relates to mainly self-employment, small and medium-sized enterprises
(SMEs) and start-ups.

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 International Journal of Civic Engagement and Social Change, 2(1), 30-42, January-March 2015 33

Indian Startup Prospects

Headstart is an organization that runs events and talks across India to help build the startup
ecosystem and since its inception in 2006/7 it has seen numerous positive developments. Aditya
Mishra, the co-founder, lists them as follows: Firstly, the quality of startups has gone up. Secondly,
the people he encounters have more real world experience, which makes their entrepreneurial
ambitions more viable. Thirdly, there is now more media focus on the startup scene, which has
placed a spotlight on entrepreneurship as a career path. Serial entrepreneur Ravi Jagannathan,
MD & CEO of Y-Cash Software Solutions, who counts previous successes in eMudhra and
Taxsmile, adds that outside of government intervention there has been a lot of change in the
way growing organizations are supported: “[Whether] it is money related, or incubation centre
related, infrastructure related, mentoring related, [there are now] so many services available
within the system. Over the last few years there has been encouragement at the college level,
encouragement from institutions, support available from investors and incubation centre. It is
[all] very conducive for a startup to grow.”
On the consumer side the growth in mobile and internet has seen the level of customer
acceptance for startups grow. There has also been a lot more openness in terms of large compa-
nies partnering with startups, be it TATA, Infosys etc. India is a lucrative market. More capital
investment is around. However, it is at nowhere near the level it might be in other markets or as
required. Fundraising is still difficult in India compared to other parts of the world. But compared
to what it was five years back it has become a lot easier. Unfortunately, developments in the
consumer space don’t necessarily translate to benefits in the business arena. In essence, technol-
ogy is also not seen as necessary expenditure because it has not been the same driver for growth
as consumer spending. No doubt that the startup scene will only become more advanced. There
are very smart people starting very smart things. Once that starts happening money will follow.
Success is typically a combination of three things: opportunity, talent and capital. Of course,
capital availability, funding will change overnight; it will probably remain the same for a year
or two, but with so many experienced people starting interesting things, a lot more interesting
startups can be anticipated.
Surprisingly, most of the literature on start-up relates to entrepreneurship defined by Low
and McMillan (1988, p. 141) as the “creation of new enterprise”. This definition reflects a
growing awareness that entrepreneurship is a “process of becoming rather than state of being”
(Bygrave, 1989, p. 21). Starting a business is not an event, but a process which may take many
years to evolve and come to fruition. Gartner (1985) proposes a conceptual framework of new
venture creation that portrays the process as an interaction of the environment, the individual, the
organisation, and entrepreneurial behaviour. In the same vein, Greenberger and Sexton (1988)
present new venture creation as an interactive process in which personal characteristics, including
personality, interact with an interpretation of salient events in the environment to influence deci-
sions concerning new venture creation. Bird (1988) notices also that both personal characteristics
and environmental factors define entrepreneurial intentionality. She describes intention as a state
of mind that focuses a person’s attention, experience, and behaviour toward a specific object or
method of behaving and further suggests that entrepreneurial intention directs critical strategic
thinking and decisions, and operates as a perceptual screen for viewing relationship, resources,
and exchanges. However, all of these studies have confined themselves to an examination of
existing entrepreneurs. While often quite rigorous and wide-ranging in their methodology, they
have ignored the very large pool of prospective entrepreneurs who never actually go on to form
a business. This omission is more than just a curious anomaly; it is critical to an effective un-
derstanding of how and why entrepreneurs begin, that is the startups.

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34 International Journal of Civic Engagement and Social Change, 2(1), 30-42, January-March 2015

A startup is a temporary organization in search of a scalable, repeatable, profitable business

model (Blank and Dorf 2012). A small startup founded by two or three entrepreneurs with a handful
of employees can produce and test the feasibility of tens of possibilities for a new business idea,
producing a viable product in a matter of a few months. Thus, a startup company or startup is a
company, a partnership or temporary organization designed to search for a repeatable and scal-
able business model. These companies, generally newly created, are in a phase of development
and research for markets. The term became popular internationally during the dot-com bubble
when a great number of dot-com companies were founded. Startup companies can come in all
forms and sizes. A critical task in setting up a business is to conduct research in order to validate,
assess and develop the ideas or business concepts in addition to opportunities to establish further
and deeper understanding on the ideas or business concepts as well as their commercial poten-
tial. Business models for startups are generally found via a bottom-up or top-down approach.
A company may cease to be a startup as it passes various milestones (Rachleff, Andy, 2013)
such as becoming publicly traded in an IPO, or ceasing to exist as an independent entity via a
merger or acquisition. Successful startups are typically more scalable than an established busi-
ness, in the sense that they have the potential to grow rapidly with limited investment of capital,
labor or land. Startups encounter several unique options for funding. Venture capital firms and
angel investors may help startup companies begin operations, exchanging seed money for an
equity stake. In practice though, many startups are initially funded by the founders themselves.
Factoring is another option, though not unique to startups. Some new funding opportunities are
also developing in crowdfunding.1 Startups usually need to form partnerships with other firms
to enable their business model.2
To become attractive to other businesses startups need to align their internal features, such
as management style and products with the market situation. In their 2013 study Kask and Linton
develop two ideal profiles, or also known as configurations or archetypes, for startups commercial-
izing inventions. The Inheritor profile calls for management style that is not too entrepreneurial
(more conservative) and the startup should have an incremental invention (building on a previ-
ous standard). This profile is set out to be more successful (in finding a business partner) in a
market that has a dominant design (a clear standard is applied in this market). In contrast to this
profile is the Originator which has a management style that is highly entrepreneurial and have
a radical invention (totally new standard). This profile is set out to be more successful (in find-
ing a business partner) in a market that does not have a dominant design (established standard).
New startups should align themselves to one of the profiles when commercializing an invention
to be able to find and be attractive to a business partner. By finding a business partner a startup
will have greater chances to become successful.3
Startups utilize a casual attitude in some respects to promote efficiency in the workplace,
which is needed to get their business off the ground. In a 1960 study, Douglas McGregor stressed
that punishments and rewards for uniformity in the workplace is not necessary, because some
people are born with the motivation to work without incentives.4 This removal of stressors al-
lows the workers and researchers to focus less on the work environment around them, and more
at the task at hand, giving them the potential to achieve something great for their company. This
culture has evolved to include larger companies today aiming at acquiring the bright minds driv-
ing startups. Google, amongst other companies, has made strides to make purchased startups
and their workers feel right at home in their offices, even letting them bring their dogs to work.5
The main goal behind all changes to the culture of the startup workplace, or a company hiring
workers from a startup to do similar work is to make the people feel as comfortable as possible
so they can have the best performance in the office.

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 International Journal of Civic Engagement and Social Change, 2(1), 30-42, January-March 2015 35

Startups Ecosystems

Kakati (2003) carried out a cluster analysis showing that it is possible to find patterns shared by
successful and unsuccessful ventures and suggested that it is not the product uniqueness relative
to competitors that makes a startup successful. Instead, it is linked to the firm’s ability to meet
the unique requirements of customers. According to Kakati (2003), the critical attributes for the
startup success are the entrepreneur’s quality, the resource-based capability, and the competitive
strategy; also, it is advisable to use multiple performance criteria to measure the startup success,
instead of one single measurement (such as ROI or market share). Regarding startup ecosystems,
in the Secrets of Silicon Valley, Piscione (2013) explores the characteristics of the first and most
successful startup ecosystem of the world, which generated more than 6,000 innovative compa-
nies. For her, there is a shared set of attitudes, values, goals, and practices that turn the Valley
into a unique place that is difficult to reproduce. Nevertheless, some of the Valley characteristics
could be (and actually already are) reproduced in other places. Piscione (2013) points out the
characteristics of a healthy startup ecosystem: (1) the presence of a high ranked University (e.g.,
Stanford), (2) the cultural mix of experienced and high-talented entrepreneurs, investors, and
academics, (3) a wellness mindset and quality of life, with casual offices, healthy work culture,
and disdain for hierarchical communication models, (4) people from many parts of the world
and the Immigration and Nationality Act of 1990 that encouraged highly skilled immigrants to
move to urban centers, (5) risk and failure being embraced as part of the entrepreneurial journey,
(6) authentic entrepreneurs with passion to make a difference in humanity, (7) a well-established
patent industry, (8) passionate, authentic, driven by ideas, fearless in risk-taking, trustworthy,
and resilient people, (9) no idea considered crazy, (10) the Venture Capital industry on virtuous
cycle, where successful entrepreneurs take their exits earnings to invest in new startups, and
(11) network culture of freely exchanging ideas. Many of these characteristics are similar and
also present in the Indian environment (Deshpande and Baporikar, 2012a).
Hwang and Horowitt (2012) claim that what explains the success of the Silicon Valley as
a fruitful environment for innovation is not only the availability of qualified labor, capital, and
technology but also, and most importantly, the unique differences in social behavior presented by
people in the Valley. They proposed a Rainforest model of innovative ecosystems in opposition
to a conventional plantation or agricultural model. The rainforest metaphor, with its diversity
and inherent chaotic processes, reflects better what is important for innovation to emerge. They
claim that the capacity of the ecosystem to promote innovation derives from its diversity of
talents, trust across social barriers, motivations that rise above short term rationality, and social
norms that promote rapid, “promiscuous” collaboration and experimentation among individuals
(Hwang and Horowitt 2012). Indian entrepreneurship development shows that this distinct social
behavior is highly present in the Indian ecosystem. (Baporikar, 2013)
Breznitz and Taylor (2014) argue that even in the presence of all factors for the good health
of a technological hub, the entrepreneurial ecosystem will not flourish if social fragmentation is
observed. In other words, the local high-tech industry must develop rich multiple, locally centered
social networks to enable growth of the ecosystem. This is proved with the development in and
around Software Parks in India (Baporikar, 2012). Graham (2012) considers high growth rate
one of the most important characteristics of startups and the secret for a great startup ecosystem
is to have the right people working there. He claims that two kinds of people create a tech hub:
investors and tech experts, but “a startup with the best people will beat one with funding from
famous VCs”. Graham also defends that a tech hub can only exist with the presence of a first
rate university, which is certainly the case of India in the fields of Computer Science and Engi-
neering. For him, a high-tech city needs to be more liberal and tolerate odd ideas. A technology

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36 International Journal of Civic Engagement and Social Change, 2(1), 30-42, January-March 2015

ecosystem grows organically and takes time (Graham 2006a; Graham 2006b). Cometto and Piol
(2013) analyses the story of the New York City entrepreneurship ecosystem. In spite of having
some history of successful startups, the numbers are lower than those in the Valley (the Valley is
five to six times larger than New York in volume of invested capital). A recent (2013) partnership
between Cornell University and Technion and an ambitious high-tech program created by the
Mayor Bloomberg aims to transform New York into the largest innovation center in the world.
The advantages of NYC that Cometto and Piol cite are: (1) easy access to capital, as being close
to the financial center of the world; (2) the new on-going, long-term project for Cornell NYC
Tech University campus; (3) tolerance for high risk and failure; (4) a great sense of community,
generosity and networking; (5) NY Tech Meetup, a non-profit organization with over 36,000
members supporting the New York technology community (nytm.org); (6) a big angel investors
community based on the giving back culture; and (7) a large community with open access to
the business world. These are lessons which India needs to draw on if innovation has to foster
startups and increase entrepreneurial activities Deshpande, M. and Baporikar, N. (2012b).

STARTUP LANDSCAPE IN INDIA

The word ‘Start Up Companies’ has been buzzing all over the e-space in India these days. Ask
any graduate about his career choice and he’ll come up with a hoard of companies of which he’d
want to be a part of some day (Baporikar, 2014a). But there a select few who wouldn’t want to go
with the flow but would want to dig a channel of their own. They’d come up with the ‘E’ word:
Entrepreneur. ‘I’d want to start a company of my own’, they’d say. The number of these few is
on the rise with their success mantra: ‘I’d script my own story’. They’re tough, innovative and
brave enough to take risks and be trendsetters. With this came the trend of Start Up Companies
in India. What started off as a revolution in the 1980s in the Silicon Valley has managed to reach
India and is now the biggest thing cooking in the Indian Economy. Now, what exactly is it in
India? They are newly formed companies, mostly in their stage of development and bank on ideas
that seek to disrupt an existing market or create a new market. They are started by a single or a
group of entrepreneurs who may or may not have a past experience, who believe firmly in their
ideas and are ready to experiment with them. Starting from the time when N.R.Narayan Murthy
founded Infosys as a startup in 1981, India has produced many successful entrepreneurs. Sandeep
Maheshwari (founder of Images Bazaar), Neha Juneja (Greenway Grammen Infra) are a few to
be named among the many who’ve made it big. With investment facilities in India looking more
promising, more and more Entrepreneurs are looking towards Indian Investors- there are Angel
Investment Groups, Venture Capitalist firms, Equity investors who’re ready to finance them the
Seed Fund required in establishing a company. More, now with the Indian Government also
adopting investor friendly policies, a glimmer of hope lies on the Indian Investment Network to
propel the Startup Network and give it a new dimension.
India is a country with a many languages; the only country where probably for every 50
kms travelled there will be different language being spoken. So there are companies in the mo-
bile space who are leveraging that and coming up with language-based solutions. Then there
are impactful social ventures which are creating social impact. Forus Health is an example of
global innovation because they’ve created a patented technology where you can early-diagnose
and correct eye diseases – cataract and many other. Now they’ve built it in India, scaled it up,
and in fact Accel and IDG (mainstream investors) have invested. It’s a social venture which has
actually validated that it’s scalable, and now they’re looking different parts of the world where
these kinds of diseases are prevalent.

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 International Journal of Civic Engagement and Social Change, 2(1), 30-42, January-March 2015 37

In India, technologies need to solve the local problems like education reach, health care avail-
ability etc. So companies are now very strongly and in a focused manner, looking at solutions….
We’re seeing a lot of things happening in the education space because again, we are a country
with huge population. Literacy is not one of the greatest strengths: so there’s a huge urban and
rural divide, and there’s a huge divide between different states of India. Some of the companies
are looking at different options. Like, even if you’re the poorest of poor, but possess the cheapest
mobile, then how can you be educated on mobile? So there are different kinds of apps coming.

Challenges for Indian Startups

If a company’s value is based on its technology, it is often equally important for the business
owners to obtain intellectual property protection for their idea. The newsmagazine The Economist
estimated that up to 75% of the value of US public companies is now based on their intellectual
property (up from 40% in 1980).6 Often, 100% of a small startup company’s value is based on
its intellectual property. As such, it is important for technology-oriented startup companies to
develop a sound strategy for protecting their intellectual capital as early as possible.7
Startup companies, particularly those associated with new technology, sometimes produce
huge returns to their creators and investors—a recent example of such is Google, whose creators
became billionaires through their stock ownership and options. However, the failure rate of
startup companies is very high.8 Although there are startups created in all types of businesses,
and all over the world, some locations and business sectors are particularly associated with
startup companies. The internet bubble of the late 1990s was associated with huge numbers of
internet startup companies, some selling the technology to provide internet access, others using
the internet to provide services.
In India, if it is a startup and with a great, extraordinary idea, and the idea documented very
well, everything is in order – still it is very difficult to get capital. Here the mindset which is
still existent is that unless one can show a market adoption, until one can build that traction, one
will not get money easily. That’s why there is not much of innovation. In India, there are very
smart people – these also work hard, they think ahead, but they don’t have the resources and that
becomes a challenge. Though it is improving; if you see from the last 3 years, comparatively,
yes, it’s improved – a lot of angels are coming up, a lot of investors are coming up, there is
more belief in the ecosystem, but still that’s the biggest challenge. [Another challenge is] a very
evolved mentoring network – and by evolved it can be said that if you want to build a product,
an app, a social gaming app like Angry Birds today – there is a need to have support systems,
organizations, facilitators, or some mentors before starting to whom one can just go and bounce
idea or use as a spring board. This means that evolved, very structured level of mentoring is still
very much missing in India.
A clear advantage of course which can be seen is the opportunity. Because there is as such a
huge population, it’s a young population – overall the economy is doing well, the consumption
power is immense in the country, people are spending now. This is a very big playing ground for
startups, and with this kind of consuming population, if they create anything that is meaningful
that either addresses a pain point or creates an impact; it’s huge because the number which you’re
addressing is huge. So even if one price oneself very low and look at a volume, one still has a
very big playing ground. Likewise, it is true, that a lot of constraint is a lot of advantage, also.
All of us have faced so many constraints and challenges in terms of not getting support, in terms
of capital and everything. In one way, yes, it’s a challenge, but in another way it can work as an
advantage because some of the best things come out under constraint – because you know that
there is no support, there is no resource coming, so one need to figure it out. Entrepreneurship has

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38 International Journal of Civic Engagement and Social Change, 2(1), 30-42, January-March 2015

been embedded in the Indian tradition and is a part of the culture. The entrepreneurial strength
is an intrinsic characteristic of India’s history as visible in a number of communities engaged
primarily in business. The ubiquitous Indian system of ‘Jugaad’ (creative improvisation) is an
entrepreneurial trait. Recent surveys done by Goldman Sachs and Pricewaterhouse Coopers
have revealed that India has the potential to be among the world’s leading economies by 2050.

UNDERSTANDING START UPS: THE GOOD VS. BAD

We all know the amount of startups world over are growing at an increasing rate, and India is
no exception. But how can we distinguish which ones will grow and which ones will crumble?
By looking at key success factors and trends, along with looking at strategic investment, one
will be able to gauge if a startup has what it takes to sustain and grow.

Key Success Factors

The Founders: Founders with experience in the industry (Blank, Tali Hadasa. 2008) understand and
have experience in the industry they entered. They also understand the problem they are solving:

1. The Team: Look for a team that is united. People who come from similar backgrounds and
are passionate about this new idea;
2. Urgency: See if the product or service has an urgent need in the market at that specific time.
For example, Netflix became successful because at the time of their start-up, because video
started to be recorded on DVD, which was cheap enough to ship;
3. Uniqueness: Look for a product that is unlike any other and keep innovating (Chesbrough
et.al 2008). A product or solution that no other competitor can accomplish;
4. Product Reach: A product or service that will reach millions and keep them engaged;
5. Unique Value Preposition: A start up that has a clear mission, and can distinguished from
their competitors;
6. Is the Product Trendy? If the product/service is in a market that is global, and is trending,
seed investment will be attractive;
7. Capital Efficiency: Will investors be attracted to invest throughout a startups growth;
8. Investment Approach: Look at investment news, Angel Investors are all tech investors who
own their own companies, and know what startups will see sustainable growth and boast a
safe ROI. Examples:
a. Reid Hoffman, CEO of Linkedin, invested millions into Facebook, Zynga, and Flickr
all as startups;
b. Chris Sacca, former employee of Google, invested in photobucket, instagram, twitter,
and turntable.fm;
c. Peter Thiel, cofounder of Paypal, originally invested $500,000 into Facebook for 10%
of the company. Also invested in Friendster, Linkedin, and Yelp.

However, the frequent mistakes startups make are: incorporating too quickly, while incor-
porating is an appropriate step for many businesses, it pays to wait until your business idea is
well formed before taking the plunge as the concept of your business and therefore the name
is likely to change during the first few months of operation; not researching the market, a fre-
quently overlooked component of startup business is determining whether the target market for
your product or service will buy from you; over-use of attorney, as attorneys’ hourly fees add

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 International Journal of Civic Engagement and Social Change, 2(1), 30-42, January-March 2015 39

up extremely quickly and are of shocking amounts, hence it pays to do own research, draft own
documents, and seek expertise of attorney only to refine; and spending too much money on office
space and decoration, a nice office make many entrepreneurs feel their ‘own-boss’ dream come
true but expensive trappings put many startups out of business before they get off the ground.

Commandments to Startup for Success

Start-ups are the brain child of any entrepreneur who wishes to make changes in the real world
with their innovative ideas. But 50 percent of the start-ups fail before they reach their magical
‘cash flow’. There might be hundreds of mistakes because of which a start-up fails; but the com-
mon one is not to build a product which your customers really want. One of the things I always
tell startups is a principle I learnt: it’s better to make a few people really happy than to make a
lot of people semi-happy. Few commandments given by Graham, P (2008) in his ‘A Guide to
Fund Raising’ are worth noting. To those, I have added a few more, to ensure that startups meet
more success. They are:

1. Pick good cofounders;

2. Launch fast;
3. Let your idea evolve;
4. Understand your users;
5. Better to make a few users love you than a lot ambivalent;
6. Offer surprisingly good customer service;
7. Follow up with customers;
8. You make what you measure;
9. Spend little;
10. Get profitable;
11. Avoid distractions;
12. Don’t get demoralized;
13. Don’t give up;
14. Deals fall through;
15. Follow market signals;
16. Update on new product;
17. Innovate (Avidor, J 2011);
18. Adapt technology (Benkler, Y 2006);
19. SWOT Analysis (Humphrey, A 2005);
20. Develop people.

The essential task in a startup is to create wealth; the dimension of wealth you have most
control over is how much you improve users’ lives; and the hardest part of that knows what to
make for them. Surprising, more than 4 out of 10 start-ups fail before they reach their magical
‘cash flow’. There might be hundreds of mistakes because of which a start-up fails; but the com-
mon one is not to build a product which your customers really want and that is because you did
not understand them! Finally we need to invest profusely in higher education, skill development,
R&D, innovation, and in the overall ecosystem of idea-generation and the creation of cutting
edge knowledge. The needs and challenges of our society can be met through information and
knowledge economy that involves innovation and knowledge sharing across boundaries for
crafting entrepreneurial strategy. However, this needs to be based on the foundation of creating
sustainable solutions with focus on solving local needs, but which are globally competitive.

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40 International Journal of Civic Engagement and Social Change, 2(1), 30-42, January-March 2015

CONCLUSION
India is in a state of flux. The consumer population is moving online and needs to be catered for.
Whilst the business community is looking to move away from a static services model in order to
become competitive, the startup scene is gradually emerging to fill the gap. External forces also
play a significant role. Changes in government regulations, lawsuits over novel technologies, and
global recessions all affect the mixed fortunes of startup firms. Moreover, the ecosystem is still
not advanced though it much better than what it was few years ago. But it still has a long way
to go to reach maturity. This makes getting a business off the ground yet another stepping stone
in the many trials to conquering the Indian market. However, this a great big opportunity and
those that are successful now, could do very well indeed in the years ahead. The discussion here
is a tiny fraction of the hundreds of growing businesses that have started in India. However, it
provides an insight and the reason to refer to those is they all offer something interesting and in
their own individual ways, something uniquely Indian. These range from the answers to specific
Indian problems, to Indian answers to general questions. On top of this, they all appear to have
something which might make them successful in the future. Maybe then startups that can tackle
the unique challenges of this vast, varied region, really will be ready for anything? As innova-
tion builds out not just from combination of what exists already, or even from a cause-effect
relationship, but from the constant capturing and harnessing of natural phenomena (Arthur 2009),
we need to consider adopting the complex system and evolution theories to probe our startup
ecosystems. Technological innovation (Ries, E 2011), can be a very significant force to face the
key challenges of humanity today and help us to construct a better global society (Cain, S. 2012).
In particular, technologies targeting lower energy and natural resource consumption, production
of high-quality jobs, and a better quality of life, especially for underserved populations, should
receive careful attention from the public and private sectors.
Science and technology are a universal language that can be used to bring together people
from different cultures and countries in joint ventures, promoting mutual understanding and
peace. As Davila, et al, (2015) write, “Managing startup companies means not only managing
expansion but also understanding how to manage downturns so as to increase the likelihood
that the company will return to the growth path.” Hence, managers of startups in India must
differentiate between self-inflicted wounds and those caused by the vagaries of the ever-shifting
global marketplace. Last but not the least, bearing in mind that steady growth is exceptionally
difficult to achieve for most startups, they should steel themselves for the inevitable potholes,
which alone will ensure social change.

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ENDNOTES
1
“Cash-strapped entrepreneurs get creative”, BBC News
2
“Business Models, Business Strategy and Innovation”
3
“Business mating: when start-ups get it right, Kask Linton 2013”
4
Douglas McGregor. Theory X Theory Y employee motivation theory. Accel-team.com. Retrieved
on 2015-01-21.
5
Barking mad: Can office dogs reduce stress? - CNN.com. Edition.cnn.com. Retrieved on 2015-01-
21.
6
A Market for Ideas, ECONOMIST, Oct. 22, 2005.
7
See Strategic management issues for starting an IP company, Szirom, S.Z., RAPID, HTF Res. Inc.,
USA (ISBN 0-7695-0465-5); What Business Owners Should Know About Patenting, Wall Street
Journal, available at http://www.wsj.com/article/SB121820956214224545.html (Interview with
James McDonough, Intellectual property attorney).
8
“High Tech Start Up, Revised and Updated: The Complete Handbook For Creating Successful New
High Tech Companies”, John L. Nesheim.

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