Challenges faced by consumer-tech start-ups in India

Progressive digital and technology campaigns by the government, a rapidly growing internet user base, a growing smartphone market and the booming start-up industry – what could go wrong in this ecosystem? However, all’s not well at the start-up camp as Indian tech start-ups are facing hurdles in the form of domestic risks and challenges.

With the emergence of e-commerce towards the late 2000s with companies like Flipkart taking the lead and the subsequent growth of firms like Ola, Snapdeal and Paytm, India’s start-up ecosystem was aiming at reinventing the success of America’s Silicon Valley.

Today, the Indian internet-based market is expected to reach $140 billion by 2020. To support this growth, the internet user base is expected to cross 500 million by 2017. Despite this rapid growth and Indian-born leaders like Satya Nadella and Sundar Pichai leading some of the biggest companies of the world, things are not as glowing as they seem. The country’s start-up ecosystem does not even touch the top 30 in A.T. Kearney’s global e-commerce index.

This is primarily due to onerous tax laws and poor infrastructure in transportation divisions. Moreover, people still prefer cash as a mode of payment since electronic payment has still not penetrated tier 2 and tier 3 cities aggressively.

Another aspect of the challenges faced is that public stock issuances are not fully integrated into the system. This is because firms are not able to receive profits and Indian retail investors aim for profit-based models rather than revenue-based ones.

While SEBI is mending listing norms and a major shift is expected from that, the B2C sector is slowly getting overcrowded with start-ups that are breaking down the target sectors. A similar approach to the B2B market can certainly bring a balance and present more chances for first mover advantages.

With the Make In India and Start-up India Stand up India campaigns in the news, the Indian government can become a key player in the improvement of the start-up ecosystem.