INTERNATIONAL SCHOOL OF BUSINESS

& MEDIA PUNE

A
DISSERTATION
On

Study on Start-up culture in India

UNDER THE GUIDANCE OF

Prof. Ajay Ramdasi

SUBMITTED BY
RABI KUMAR
20201118
PGDM 2020-22

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 Acknowledgement

“Gratitude is not a thing of expression, it's more a matter of feeling”

This project would not have been possible without the kind support and help of many individuals
and organizations. I would like to extend my sincere thanks to all of them.
I am highly indebted to Dr. Pramod Kumar, President and Founder, International School of
Business & Media, Pune for providing me this opportunity.
Also I express my deep sense of gratitude to Prof. Ajay Ramdasi, Faculty of International School of
Business & Media, Nande, Pune for his eminent guidance, innovative ideas for their constant
supervision as well as for providing necessary information regarding the project & also for their
support in completing the project.
I would like to express my gratitude towards my other respected Faculties for their kind co-
operation and encouragement which help me in completion of this project.
My thanks and appreciations also go to my colleague in developing the project and people who
have willingly helped me out with their abilities.

RABI KUMAR
Roll No: 20201118
PGDM Batch: 2020-2022
ISB&M PUNE

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INDEX

S. No. Particulars Page No.

1 Introduction 4-5

2 Literacy Review 6-8

3 Need and significance of the study 9

4 Statement of problem 9

5 Objectives 9

6 The start-up scenario in India 10

7 Roles of Start-ups 11-15

8 Steps taken by the government 16-17

9 Government initiatives 18

10 Reasons for failure 19

11 Issues and challenges of start-ups 20

12 Some of the major issues and challenges 21-22

13 Examples of opportunities for start-ups 23-25

14 Case Study on Paytm 26-28

15 Conclusion 29

16 Suggestions 29

17 References 30

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Introduction -
Start-Up India Start up India campaign is based on an action plan aimed at promoting
bank financing for start-up ventures to boost entrepreneurship and encourage start-ups with
jobs creation. The campaign was first announced by the Prime Minister in his 15th August,
address from the Red Fort. It is focused on to restrict role of States in policy domain and to
get rid of "license raj" and hindrances like in land permissions, foreign investment proposal,
environmental clearances. It was organized by Department of Industrial Policy and Promotion
(DIPP).A start up is an entity that is headquartered in India which was opened less than five
years ago and have an annual turnover less than ₹25 crore (US$3.7 million). The government
has already launched PMMY, the MUDRA Bank, a new institution set up for development
and refinancing activities relating to micro units with a refinance Fund of ₹200 billion
(US$3.0 billion).

The Start-up India initiative is also aimed at promoting entrepreneurship among

SCs/STs, women communities.

Launch The event was inaugurated on 16 January 2016 by the finance minister Arun
Jaitley. Among the attendees were around 40 top CEOs and start-up founders and investors
from Silicon Valley as special guests including Masayoshi Son, CEO of Soft Bank, Kunal
Bahl, founder Snaa, Travis Kalanick, founder of Uber, Adam Nuemann, CEO of WeWork,
Sachin Bansal, founder of Flipkart and others.

Start-up India is a revolution scheme that has been started to help the people, who
want to start their own business. These people have ideas and capability so government will
give them support to make sure they can implement their idea & grow. The campaign was
first announced by Prime Minister Modi in his 15 August 2015 address from the Red Fort.
Success of this scheme will eventually make India, a better economy and a strong nation.

Start-up India Definition First of all we have to understand about Govt Start-up
Definition. Any Legal entity will be identified as a start-up. Registered or incorporated not
prior to 5 years. If its turnover does not exceed 25 crores in the last five financial years. It is
working towards innovation, development, deployment and commercialization of new
products, processes, or services driven by technology or intellectual property.

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 Initially, India was considered as the market for providing cheap labour to the world
and for export of Indian services in the field of IT. Due to this India has witnessed low
product development and innovation in the past. But, still it is not too late and the culture of
start-ups has started in India in the recent past. It has already started bearing fruits and is all
geared up to benefit the Indian economy in the long run. The country has more than 19,000
technology enabled start-ups, led by consumer Internet and financial services start-ups, the
Economic Survey report said. "Indian start- ups raised $3.5 billion in funding in the first half
of 2015, and the number of active investors in India increased from 220 in 2014 to 490 in
2015. As of December 2015, eight Indian start-ups belonged to the 'Unicorn' club (ventures
that are valued at $1 billion and upwards)."It will help our country to show the talent of
youths through their innovative businesses all across the world. There is need to spread
awareness about this programme in all the institutions including Indian Institutes for
Technology, central universities, Indian Institutes of Management, etc. so that they can be
connected live through this scheme in future. It will be proved much helpful in improving the
economic growth of the country and career growth of the youths.

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Literacy Review -
Sharma, (2013), made a study on women entrepreneurs in India. She concluded that
women entrepreneurs face many problems like social barriers, legal aspects, lack of
education, family support etc. She also explained the various factors like pull and push
factors affecting entrepreneurship. According to her women have the probable and firmness
in setting up the enterprise and fighting against the all odds.

Dhameja, Suresh Kumar(2001). A study of entrepreneurial performance and problems of

women in business in the States of Punjab, Haryana and Union Territory of Chandigarh (Dr. BS
Bhatia and Dr. J S Saini), Department of Management, Punjabi University, Patiala.

Bhalla, Gurdeep Singh(2004). Entrepreneurship development programmes (EDPs):

role of developing small scale industries in India with special reference to Punjab, Haryana
and Himachal Pradesh. (Prof S C Vaidya), Department of Management, Punjabi University,
Patiala.

Goyal, Parkash, (2011), in their research paper concluded that at present the position
of entrepreneur is better than before. Economies are taking the efforts to make and enhance
the entrepreneurship. Government is providing the awareness and necessary steps are being
taken up by them. Start-ups must be configured properly with the business expertise to
encounter the latest trends and changes in the environment and capable enough for aspiring
the supremacy in the entrepreneurial coliseum.

Pandey, Tripti.(2007)A critical study of the contemporary scheme for the social
economic development of women entrepreneurs of Uttar Pradesh in the context of
privatization and globalization with reference to District Kanpur Nagar. (Shri K N Tandon),
Department of Commerce, Chhatrapati Shahu Ji Maharaj University, Kanpur.

Arora, Kapil(2004). Entrepreneurial profile, success and failures: a case study on science and
technology entrepreneurs in South Gujarat region. (Dr S S Srivastava), Department of Management,
South Gujarat University, Surat.

Venkateshwarlu,Chaluvadi(2005)Entrepreneurship: a study of socio-psychological

correlates. (Dr.SV Satyanarayana), Department of Commerce, Osmania University,
Hyderabad.

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 Ganapathi Batthini,(july 2010) Research in Entrepreneurship: This paper presents a
critical study of the trends in the growth and development of entrepreneurship research in
Indian Universities. This study reveals the number and percentage of Doctoral Dissertation
(PhD) programmes in entrepreneurship carried out in various Indian universities in
comparison to that of Social Sciences. The distribution of research in entrepreneurship,
university wise, gender wise and language wise has been examined. Implications on the status
of entrepreneurship research in Indian universities are also drawn.

Caliendo, Kunn, Wiebner and Hogenager (2015) finds the difference between
subsidized start-ups out of unemployment and non-subsidized start-ups out of non-
employment. It reveals that the initiator of the subsidized start-ups have no lack of
conventional education. Although they have less employment and less exposure to the
industry. And finally they concluded that the wealth stock restriction among the unemployed
in respect to availability of personal equity and out - break of loans is the major constraint.

The objectives of a start-up are to be one’s own boss and to create employment to
others which warrants lot of endurance and sacrifice. Large population with high
percentage of middle income group, educated youth with technical background, IT
domination, high internet and mobile penetration are some of the drivers that have thrown
up opportunities for spreading start-up revolution in India. The ‘Make-in-India’ initiatives
and other government schemes have also given a boost to start-ups with many individuals

entering the fray. Starting a venture is a well-planned and disciplined exercise with due
consideration of both internal and external factors that may impact the sustainability of the
venture. The idea behind the venture, market size, revenue and profit targets are some of
the important factors that need to be clearly defined before embarking on the journey. Time,
team work and tenacity are important elements which determine entrepreneurial success.
Infrastructure, government regulations and availability of finance at various stages of
growth could be some of the challenges for start-ups. In fact, history is replete with examples
of start-ups which began with big fanfare but ended as damp squibs within a short span of
time due to various reasons. The paper discusses few issues and challenges that an Indian
start-up has to face and the opportunities that country can provide in the current ecosystem.

A start-up venture could be defined as a new business that is in the initial stages of
operation, beginning to grow and is typically financed by an individual or small group of

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individuals. It is a young entrepreneurial, scalable business model built on technology and
innovation wherein the founders develop a product or service for which they foresee demand
through disruption of existing or by creating entirely new markets. Start-ups are nothing but
an idea that manifests into a commercial undertaking.

Grant Thornton (2016) define start-up business as an organization

which is Incorporated for three years or less

At a funding stage of Series B or less(B Series means second round of funding)

An entrepreneurial venture/a partnership or a temporary business organization

Engages in development, production or distribution of new products/services or processes

Revenue of up to INR 25 cr.
Not formed through splitting or
restructuring Employing 50 people or less
Department of Industrial Policy and Promotion (DIPP) define a start-up as an entity incorporated
or registered in India with following parameters:

Established not prior to seven years, (for Biotechnology Start-ups not prior to ten
years) With annual turnover not exceeding INR 25Cr in any preceding financial
year, and
Working towards innovation, development or improvement of products or processes or
services, It is a scalable business model with a high potential of employment generation or
wealth creation
It is to be noted that such entity is not formed by splitting up, or reconstruction, of a
business already in existence. Also, an entity shall cease to be a start-up if its turnover for the
previous financial years has exceeded INR 25cr or it has completed 7 years (biotechnology
start-ups 10 years) from the date of incorporation/registration(‘Start-up India’, 2017)

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Need and significance of the study –
During 2014-15, more than 98,000 new companies were incorporated in India.
According to a recent study by Nasscom, India ranks third among global start-up
ecosystems with more than 4,200 start-ups that employ close to 85,000 employees. With
over $5 billion worth of investment in 2015 and three to four start-ups emerging every day, it
is projected that the number of Start-Ups in India will increase to more than 11,500 by 2020,
with job creation from these entrepreneurs reaching 250-300k by 2020.The number of
Investors has also risen multi-fold in the past few years.

At the same time, the number of funds investing in India grew by 40% in2013-14 and
half of those funds were investing in India for the first time. Thus, the ecosystem for both
technology and traditional start-ups has been expanding at a quick pace. With so much
happening around, we can safely say that there is a revolution presently undergoing in India.
This can certainly not be dismissed as a passing trend and it’s surely going to change the way
the markets are working today in India.

Statement of problem –
The emergence of Start-Up wave in India is a relatively new phenomenon. India is
today undergoing a fundamental shift with entrepreneurship & innovation being primary
catalysts in job creation and solving everyday problems. A decade ago, there used to be only
a handful of Indian Start-Up success stories such as MakeMyTrip.com and Naukri.com. But
now, with successes such as Flipkart, Quickr, Practo, Zomato, and Inmobi, the Indian Start-
Up Ecosystem has indeed come a long way.

Objectives -
1. To examine the present successful start-ups and their contribution to economic growth by
way ofemployment generation and impact on GDP.

2. To identify various govt. initiatives for the development of start-ups.

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The start-up scenario in India -
It is to be noted that every year more than 800 technology start-ups are being set up
in India. By 2020, it is estimated that around 11,500 tech-start-ups are going to be established
with employment potential of around 250,000 technical people (NASSCOM, 2015). It is
admirable to note that India is amongst the top five countries in the world in terms of start-
ups with 10,000+ led by US with 83,000+ comprising 43% tech-based firms with 9%
managed by women entrepreneurs. The number of incubators also has crossed 100 in 2014-
15 to give boost to the start-up saga (Grant Thornton, 2015).Sector wise, the distribution of
Indian businesses is:

Table:1 Break-up of Indian Start-up Businesses

Technology Based Non-Technology Based

E-Commerce - 33% Engineering- 17%
B2B - 24% Construction-13%
Internet - 12% Agri- products- 11%
Mobile apps - 10% Textile - 8%
SaaS - 8% Printing & packaging – 8%
Other – 13% Transport & logistics- 6%
Outsourcing & support -5%
Others-32%

Source: Start-ups India- An Overview, Grant Thornton, 2015

The start-up ecosystem

Along with government initiatives, there is a definite movement in start-up arena in
India due to penetration of IT and internet. Many start-ups are coming up in service sector
including education, legal, retail, insurance and health. With customers becoming aware of
the benefits and convenience, the popularity and viability of start-ups is no more a difficult
proposition for an entrepreneur.

A number of venture capitalists and angel investors are aggressive and gung-ho on
Indian start-ups as they see lot of potential with few expected to become unicorns (high
valued companies) bringing in good returns. On the contrary, there are examples of few start-
ups that failed and eventually closed their businesses due to various issues and challenges.

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 India being a large country with over 130Cr population, boasts of high demographic
dividends due to large number of young people. According to the latest UN report India with
356 million 10-24 year-olds have the largest concentration of youth population who are going
to be the driving force behind innovation and creation with commensurate demand and
consumption of goods and services (Mittal, 2014).. India's tele-density reached 76.55 percent
with a subscriber base of 95.76Cr bringing in convenience and reach to consumer segments
including Tier-2 and 3 towns (TRAI,2017). Further, GoI’s digital push is going to improve
connectivity and data to higher levels bringing in more software applications to find solutions
for day-to-day issues. The reduction in data charges will also help start-ups to tap into new
markets and even disrupt traditional businesses.

Roles of Start-ups-
Successful leading start-ups in India
In last one year India has seen many start-ups, which helped in the growth of the
economy. In every sector like retail, hotel industry, medicine, education, transportation etc.,
start-ups emerged like a boom. Few of the leading start-ups are Flipkart, Oyo Rooms,
Chaayos, Ola cabs, Paytm, Redbus, Zomato, Zivame, Justdial,Pepperfry, LImeroad, Quikr,
Cardekho, Practo, Urbane ladder, policybazar, Grofers, Shopclues, Nearbuy, Voonik, Inmobi,
Firstcry, Yepme, Mobikwik, Bigbasket, Nykaa, Hopscotch, Bluestone, Caratlane, Paperboat,
Gojavas, Craftsvilla, Roposo, Voylla, Babyoye, Naaptoletc.

Around 3.61 crore MSMEs, contributing 37.5 per cent to the country’s GDP, have a
critical role to play in boosting industrial growth and ensuring the success of the Make in
India programme. The good part is the sector currently employs close to 40 per cent of
India’s workforce, contributes 45 per cent to India’s manufacturing output and 42 per cent to
India’s total exports.

Start-up India is a much appreciated, much needed and an innovative initiative of the
Government of India for encouraging people for start-up in India and thus to invite them in
country’s main economy stream in order to form better and strong economy. India needs 10
million jobs a year and global data shows that it is start-ups, not large enterprises that create
net new jobs in any country. Start-ups are also the centres of innovation and are a great way

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to enhance employment creation in the economy.

With over $5 billion worth investment in 2015 and three to four start-ups emerging
every day, India has paved its way to secure the third position in the world in terms of the
number of start- ups, 4200 and counting, a growth of 40%, by the end of 2015.

The latest report by industry body NASSCOM and Zinnov, analyses the current
scenario and emerging trends across the various dimensions that define the Indian start-up
ecosystem, and gauge India’s position as a global start-up hub that is becoming attractive for
investors, start-ups, & corporates.

As per the statistics given in the report, the number of active investors in the
ecosystem has grown from 220 in 2014 to 490 in 2015, depicting a 2.3X growth. Further, 8
out of every 10 top VC/PE Firms in India are foreign, and global investment in the Indian
ecosystem is leading to an increased FDI.

The report also states that total funding in 2015 has grown by ~125% over 2014.
Similarly, the number of accelerators grew by 40% from ~80 in 2014 to ~110 in 2015.

India serves as the fastest growing start-up-base worldwide and stands third in
technology driven product start-ups just after US and UK respectively.

The report reveals that the boom in the start-up ecosystem has generated employment
for around 80,000 to 85,000 people in total. More than 65% of the start-ups are located in
NCR, Mumbai and Bangalore

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 The stats on the demography of the ecosystem says that 72% of the founders are less
than 35 years old making India home to the youngest entrepreneurs in the world, with gender
breakup of 91% male and 9% female.

Majority of the 1200 new start-ups are B2C, primarily present in 3 segments namely
ecommerce, consumer services and aggregators followed by hyperlocal, health-tech, edu-tech
and analytics.

The boom in the Indian start-up ecosystem has made a conspicuous impact on certain
critical areas such as education, healthcare, employment, agriculture etc. On the macroscopic
level, the ecosystem has contributed majorly to the Indian economy by enhancing citizen’s
life, building innovative solutions and generating scope for opportunities for stakeholders.

The digital revolution coupled with start-up evolution has been instrumental in
transforming India’s image as the repository of next big idea. Gone are the days when Silicon
Valley was considered, “the space” for start-ups to be in. Today, India stands as one of the
major technology hotbeds offering fascinating opportunities for emerging companies to
thrive and establish themselves in the world with their innovative ideas and disruptive
approaches.

India’s current youth population is expected to serve for the country at least for the
next 3 to 4 decades. India will become the world’s youngest country by year 2020, with an
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 average age of 29 years, and account for around 28% of the world’s workforce. The country’s
population pyramid is expected to across the 15–64 age brackets over the next decade. India
will be experiencing a period of “demographic bonus,” where the growth rate of the working
age population would exceed that of the total population, which is certainly an added
advantage. Hence there is a huge opportunity to young skill owners and young innovators.
Some recent trends suggest that since decade, Indian youth have inclined toward start-up and
business rather than doing jobs. So Start-up India will be proved as a masterstroke in
upcoming years.
Indian start-up industry composition
Total start-ups 10,000 (approx.)

Start-ups % Share New start-ups

annually
4,300 | 5,700 43% | 57% 800 | N.A

 Sector Concentration

E-commerce - 33% Engineering - 17%B2B -

24%Construction- 13%

Consumer internet - 12% Construction- 13%

Mobile apps - 10% Agri products- 11%

SaaS - 8% Textile - 8%

Other – 13% Printing & packaging – 8%

Transport & logistics - 6%

Outsourcing & support – 5%

Other – 32%

Technology based start-ups Non technology based start-ups

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 steps taken by the government –
The govt. plays an important role for establishing the new enterprises. The plans,
policies, initiatives, strategies of the govt. affect the entrepreneurs. Following are the 19 plans
as an initiative for start-ups:
1).Self certification: The main objective of the govt. is to reduce the load on the start-ups
hence allowingthem to concentrate fully on their business and keeping the low cost of
adherence. It will include labour laws .and environment related laws.

2). Start-up India hub: A single contact point will be created for the start-ups in India,
which will enable them to exchange knowledge and access to funds.

3). Register through app: An online portal, will be available in the form of a mobile
application, which will help entrepreneurs to interact with the govt. and other regulatory
officials.

4). Patent protection: A monitoring system for patent inspection at reduced costs is being
created by the central government. It will enhance perception and acquisition of the
Intellectual Property Rights (IPRs) by the entrepreneurs.

5). Rs. 10,000 crore fund: The government will develop a pool with a starting aggregation of
Rs. 2,500 crore and a total aggregation of Rs. 10,000 croreover four years, to help new
entrepreneurs. The important role will be played by the Life Insurance Corporation of India in
blossoming this collection. The fund will be managed by a group of professionals selected
from the start-up industry.

6). National Credit Guarantee Trust Company: A National Credit Guarantee Trust
Company(NCGTC) will be created with a budget of Rs. 500 crore per year for the next four
years to help the drift of funds to entrepreneurs.

7). No Capital Gains Tax: Investments through venture capital funds are exempted from the
Capital Gains Tax. The same policy will be executed on start-ups.

8). No Income Tax for three years: Start-ups would not pay Income Tax for the first three years.

9). Tax exemption for investments of higher value: In case of ventures of higher amount
than the market price, they will be exempted from paying tax.

10). Building entrepreneurs: Creative study plans for students will be implemented in over
5 lakh schools. Apart from this, there will also be an annual businessman grand provocation
to develop high class businessmen.
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11). Atal Innovation Mission: This Mission will be propelled to revitalize ideas and motivate
creative youngsters.

12).Setting up incubators: A private-public partnership model is being considered for 35

new incubators and 31 innovation centres at national institutes.

13). Research parks: The government plans to lay seven innovative research parks,
including six in the Indian Institute of Technology campuses and one in the Indian Institute of
Science campus.

14). Entrepreneurship in biotechnology: The government plans to construct 5 advanced

biotech nests, 50 advanced bio incubators, 150 technology transplant offices and 20 bio
connect offices in the country.

15). Dedicated programs in schools: The government plans to inculcate transformational

programs for scholars in over 5 lakh schools.

16). Legal reinforces: A committee of moderators will give legal help and reinforcement in
complying patent applications and other papers.

17). Rebate: An exemption value of 80 percent of the total value will be given to the start-
ups on filing the patent applications.

18). Easy rules: S standards of communal acquisition and mandate of switching have been
easier for the entrepreneurs.

19).Faster exit: If an entrepreneur is unsuccessful than the government will help him to
get a particular resolution for their complication.

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Government initiatives -
Indian government is serious in promoting entrepreneurship at the start-up level and
has taken a number of initiatives to ensure appropriate support. In this aspect it is relevant to
mention ‘Make in India’ campaign introduced in September’14 to attract foreign investments
and encourage domestic companies to participate in the manufacturing sector. The
government increased the foreign direct investment (FDI) limits for most of the sectors and
strengthened intellectual property rights (IPRs) protection to instil confidence in the start-ups.
In order to make the country as number one destination for start-ups, Government of India
(GoI) has introduced a new campaign called ‘Stand-up India’ in 2015 aimed at promoting
entrepreneurship among women and to help start-ups with bank funding. Another
commendable and far reaching initiative is ‘Digital India’ introduced in 2015 to ensure
government services are made available to every citizen through online platform that aims to
connect rural areas by developing their digital infrastructure which translates into a huge
business opportunity for start-ups.

There are numerous government and semi-governmental initiatives to assist

start-ups. Start-Up India
This initiative provides three-year tax and compliance breaks intended for cutting
government regulations and red tapism.

MUDRA Yojna

Through this scheme, start-ups get loans from the banks to set up, grow and stabilize
their businesses.

SETU (Self-Employment and Talent Utilization) Fund

Government has allotted Rs 1,000 Cr in order to create opportunities for self-employment and
new jobs mainly in technology-driven domains.

E-B iz Portal

Government launched e-biz portal that integrates 14 regulatory permissions and licenses at
one source to enable faster clearances and improve the ease of doing business in India.

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Reasons for failure -
As regards major reasons for failure of start-ups, a survey based on analysis of 101
firms showed that 42% failed as the product had no market, 29% firms ran out of cash, 23%
did not have the right team,18% closed due to pricing issues, 17% firms had poor product,
14% failed due to poor marketing and 8% had no investor interest(Griffith,2014). These
reasons substantiate most of the issues and challenges that have been enumerated above.

Opportunities for start-ups

In spite of challenges and problems that start-ups are facing, Indian markets provide a
plethora of opportunities to find solutions tailored to solve them. Below is a list of few of the
opportunities that are discussed for consideration by start-ups.

India’s large population

The population of India is a huge asset for the country. By 2020, it is expected that the
working age population would surpass the non-working population. This unique demographic
advantage will offer a great opportunity to any start-up. Various infrastructure issues and the
bottom- of- the- pyramid market would provide huge opportunities for the start-ups.

Change of mind set of working class

Traditional career paths will be giving way to Indian start-up space. Challenging
assignments, good compensation packages would attract talented people to start-ups. Also, it
is seen that several high profile executives are quitting their jobs to start or work for start-ups.
To reinforce the trend being seen, a survey conducted by Economic Times also confirmed
that the number of students joining start-ups and e-commerce companies has grown
considerably in the recent years (Anand, 2016)

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 Huge investments in start-ups

Huge investment in Indian start-ups from foreign and Indian investors is taking place.
In 2015, more than 300 deals were done by 300+ angels and venture capital/ private equity
players with around $6.5-billion (Rs 42,300Cr) investments making India the most sought
after destination for investments. Some of the active players are New York-based Tiger
Global Management, Russian company- DST Global, Japanese telecom giant Softbank,
Kalaari Capital, Sequoia Capital and Accel Partners. More and more are going to join the
bandwagon as this is the tipping point in Indian commerce for making good returns by
backing potential unicorns.

Investments by big business houses -

Big business houses are already investing in start-ups as they cannot use their
infrastructure to concentrate on small outfits like start-ups which require different skill-
sets. Industrialists like Ratan Tata (Ola, Bluestone etc), Azim Premji (DataStax,Myntra etc)
and many more are investing in start-ups giving desired traction and respectability to the
segment.

Issues and challenges of start-ups -

A successful start-up cannot start a business just with passion and an idea. A high level of
leadership skills with clear understanding of market, excellent communication skills, maturity to
see things in right perspective along with the ability to take calculated risks are required on the part
of the entrepreneur(Aggarwal,2017). Lack of awareness, multiple clearances, unorganised market,
poor infrastructure in Tier 2 /3 cities, lack of mentoring , stringent exit policies, corruption/red tape,
technological risk, regulatory obstacles and lack of reforms keeping pace with the fast evolving
market changes are some of the challenges as per Rashmi Guptey, Principal (Legal) of Lightbox
India Advisors Private Limited.

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Some of the major issues and challenges are discussed below:
Financial Resources
Availability of finance is critical for the start-ups and is always a problem to get sufficient
amounts (Mittal, 2014; Truong, 2016). A number of finance options ranging from family
members, friends, loans, grants, angel funding, venture capitalists, crowd funding etc. are
available. The requirement starts increasing as the business progresses. Scaling of business
requires timely infusion of capital. Proper cash management is critical for the success of the
start-ups (Skok, 2016;Pandita, 2017). A recent report paints a gloomy picture with 85% of
new company’sreportedly underfunded indicating potential failure (Iwasiuk, 2016).

Revenue Generation
Several start-ups fail due to poor revenue generation as the business grows. As the operations
increase, expenses grow with reduced revenues forcing start-ups to concentrate on the
funding aspect, thus, diluting the focus on the fundamentals of business. Hence, revenue
generation is critical, warranting efficient management of burn rate which in common
parlance is the rate at which start-ups spend money in the initial stages. The challenge is not
to generate enough capital but also to expand and sustain the growth.

Team Members
To find and hire the right kind of talent for the business with skills to match growing
customer expectations are one of the biggest challenges (Truong, 2016). Apart from
founder(s), start-ups normally start with a team consisting of trusted members with
complementary skill sets. Usually, each member is specialized in a specific area of
operations. Assembling a good team is the first major requirement, failure to have one
sometimes could break the start-up (Skok, 2016). According to a survey, 23 percent start-ups
failed because members did not work as a team. Chirag Garg, CEO, HyperDell, feels that
bringing in affordable talent at the right time is a challenge. As per Nitin Sharma, Principal
& Founding member, Lightbox India Advisors Private Limited “Hiring and retaining high
quality talent, especially in the areas of product and technology remains a key challenge”
(Choudhary,2015)

Supporting Infrastructure
There are a number of support mechanisms that play a significant role in the lifecycle of start-
ups which include incubators, science and technology parks, business development centres
etc. Lack of access to such support mechanisms increases the risk of failure.
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 Creating Awareness in Markets
Start-ups fail due to lack of attention to limitations in the markets. The environment for a
start-up is usually more difficult than for an established firm due to uniqueness of the
product. The situation is more difficult for a new product as the start-up has to build
everything from scratch.

Exceed Customer Expectations

The next most important challenge is gauging the market need for the product, existing
trends, etc. Innovation plays an important role, since, that the start-up has to fine-tune the
product offerings to suit the market demands (Skok, 2016). Also, the entrepreneur should
have thorough domain knowledge to counter competition with appropriate strategies. Due to
new technologies that are emerging, the challenge to provide over and above an earlier
innovation is pertinent. Namrata Garg, Director, SendKardo feels that the biggest challenge is
the need to constantly reinvent yourself and come up with a service to be able to match up
customer expectations and exceed them.

Tenacity of Founders
Founders of start-ups have to be tough when the going gets tough. The journey of starting a
venture is fraught with delays, setbacks and problems without adequate solutions. The
entrepreneur needs to be persistent, persuasive, and should never give up till he/she achieves
desired results. History is replete with start-ups who gave up the fight when things went
wrong. Sometimes the product could be ahead of its time or may require complimentary
technology /products for the use by the customers. For example, Apple had to delay
introduction of iTunes till the regulations favoured the launch. It is also relevant to quote
Steve Jobs who by commenting “A lot of times, people don't know what they want until you
show it to them” reiterates the fact those products from start-ups mostly fall in the “new and
untried” category where the success rate is minimal.

Regulations
Starting a business requires a number of permissions from government agencies. Although
there is a perceptible change, it is still a challenge to register a company. Regulations
pertaining to labour laws, intellectual property rights, dispute resolution etc. are rigorous in
India which takes about 30 days to comply compared to just 9 days in OECD countries? Also,
as per World Bank report, “World Bank Ease of Doing Business”, India ranks 142 out of 189
economies (Mittal,2014).
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 Growth decelerators
Some of the agencies which are part of the start-up ecosystem themselves can sometimes
become hurdles in the growing stages. As per Sneh Bhavsar, co-founder and CEO,
OoWomaniya one of the major issues is the influence of incubators, institutes and similar
organisations which try to control, manage and be the daddies of the start-ups in the name of
helping, mentoring etc. (Choudhury,2015).This needs proper coordination among the
organizations for mutual benefit.

Lack of mentorship
Milan Hoogan, Vice President -Sales and Marketing at Erfolg Life Sciences feels that lack of
proper guidance and mentorship is one of the biggest problems that exist in the Indian start-
up ecosystem (Choudhury, 2015). Most of start-ups have brilliant ideas and/or products, but
have little or no industry, business and market experience to get the products to the market. It
is a proven example that a brilliant idea works only if executed promptly (Mittal, 2014). Lack
of adequate mentoring/guidance is the biggest challenge which could bring a potentially good
idea to an end.

Lack of a Good Branding Strategy

Absence of an effective branding strategy is another issue that prevents start-ups from
flourishing at a faster pace. Hemant Arora, Business Head-Branded Content, Times Network
opines that branding demands paramount attention as it gives an identity and occupies a
space in the consumer minds(Choudhury,2015).

Replicating Silicon Valley

Koushik Shee, Founder and CEO, Effia, feels that Indian start-ups get influenced by Silicon
Valley models which may not succeed in Indian scenario. Lot of tweaking and modifications
could be required when transplanted into Indian markets keeping in mind Indian
infrastructure in terms of roads, internet, electricity and telecom penetration (Choudhury,
2015).

22
Examples of opportunities for start-ups–
Start-ups in Indian scenario have a tremendous scope in catering to local and niche
markets that could be viable and sustainable with early potential of revenue generation. With
small area of operations and right product /service the success rate could be high with
possible chance for expansion. The bottom-of-the pyramid space is a potential market for
offerings ranging from food, clothing, water and hygienic items. The selection of items would
be based on the entrepreneurs’ expertise and the area of operation.

Given below in Table: 2 is a list of current offerings by start-ups followed by list in Table: 3
(Low- Tech) and Table:4 (High Tech) of few potential domains.

Table:2 List of Current Start-ups and Area of Operations

Area of Operation Start-up Firm Name

Online food delivery FRESHMENU,SWIGGY
Online fish, meat delivery FRESHTOHOME
Big data analytics for trade PEELWORKS
Online pharmacy MYRA
Platform to get local businesses online NOWFLOATS
Logistics management software FAREYE
Lifestyle tracking platform HEALTHIFYME
Payments solutions for credit/debit cards PINELABS
AI-driven solutions for retailers- STAQU
Packaged ready-to-cook idli /dosa batter IDFOODS
Peer-to-peer lending FAIRCENT

Source: 17 Start-ups to Watch, TOI, 2017

Other areas with tremendous potential for start-ups to establish themselves and thrive are
listed in Table: 3 and Table: 4 as low-end and high-end ventures with varying degree of
investments and resources. These ventures could be solution providers for underdeveloped
and developing countries having similar economic profile at a very affordable cost.

23
 Table:3 Start-up Opportunities- Low-end Ventures

Snacks and Tiffin’s Health drinks Franchising

Waste management Media support services Food Processing
Washing and Ironing Solar Energy products Retailing
Supply of Drinking water Education & training Health& Pharmacy
Diagnostics Centres IT and ITES Food Delivery

Source: Author’s perspective

Table: 4 Start-up Opportunities- High-end Ventures (Export Oriented)

Auto-Components Ayurvedic medicines

Horticulture Software Exports
Engineering Goods Biotechnology
Organic Farming Floriculture

Case Study
“Paytm”
Paytm is an Indian payment and commerce company based out of Delhi NCR, India.
Launched in August 2010, it is the consumer brand of parent One97 Communications. The
name is an acronym for "Pay through Mobile." In 2015, Paytm became the first Indian
company to receive funding from Chinese e Commerce Company Alibaba, after it raised over
$625 million at a valuation of $1.5 billion. The Alibaba Group was the biggest stakeholder in
Paytm parent company One97 Communications. In August 2016, Paytm received an
investment from Mountain Capital, one of Taiwan-based MediaTek’s investment funds,
which valued Paytm at of over USD$5 billion. The company employs over 13,000 employees
as of January, 2017 and has 3 million offline merchants across India. It also operates the
Paytm payment gateway and the Paytm Wallet. Paytm launched bill payments services in
Canada, its first overseas market, on 16 March 2017.

24
Abstract -
Now a days, the Case Study possesses a strategic question that in the emerging
internet based service provision industry or organization, whether it is a better strategy to
develop a unique positioning on the basis of single key service or it’s better for an
organization to offer multiple services. To answer this fundamental question, the present
study employs the case example of leading e-platforms: PayTM that are employing
diametrically opposite strategies in order to scale up their ventures. It also examines the role
of Push and Pull strategies in a single industry, thus drawing the reader to take a position,
which is better and why? Keywords – PayTm, Mobile agent, Load balancing, Cloud load
balancing.

Introduction –

Now in present days with Internet people or user base in India reaching 405 million
by the end of June 2016 and Internet and Mobile Association of India (IAMAI) reporting that
the internet users in India grew 35% from January to June 2016, the emergence and future
growth of ecommerce and m-commerce is a foregone conclusion. This is evident from the
billion-dollar valuation that the top seven Indian e-Commerce companies including Amazon,
Flipkart and PayTM have reached in the early years of their inception. Although the signs
with respect to both global e-commerce as well as number of users transacting online are
encouraging, yet the strategic framework in the online sphere is still emerging. In the
absence of reference curves for various business indicators, leading organizations in the same
industry are trying contradictory approaches.

Funding –
In March 2015, Indian industrialist Ratan Tata made a personal investment in the
firm. The same month, the company received a $575 million investment from Alibaba Group
of China, after Ant Financial Services Group, an Alibaba Group affiliate, took a 25% stake in
One97 as part of a strategic agreement. Paytm borrowed 300cr from ICICI Bank in March
2016 as working capital.[citation needed]

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Paytm Wallet –
The Paytm Wallet application enables users to book air tickets and taxis, mobile
recharge, and payment of DTH, broadband and electricity bills among others, money transfer
feature does not available in desktop users and its only available for mobile users. Users can
also pay for fuel at Indian Oil Petrol pumps and buy movie tickets at PVR Cinemas through
the wallet.

Payments bank –
In 2015 Paytm received a license from RBI to start one of India's first payments
banks. At the time, the bank intended to use Paytm’s existing user base for offering new
services, including debit cards, savings accounts, online banking and transfers, to enable a
cashless economy. The payments bank would be a separate entity in which the founder Vijay
Shekhar Sharma will hold 51%, One97 Communications will hold 39% and 10% will be held
by a subsidiary of One97 and Sharma. Paytm is also approved as an operating unit for
integrated bill payment system allowing multiple payment modes for consumers.

Organization Profile –
PayTM, as its abbreviation states, Pay through Mobile was launched in 2010 by
One97 communications as a prepaid mobile and DTH recharge company. Gradually, it made
its way into the e-commerce market in the year 2014 and further added bus ticketing to its
kitty in 2015. PayTM now offers multiple products ranging from primary mobile recharges to
buying apparels or electronics enabling customers to get everything at one place. As a result,
PayTM is amongst the top ecommerce companies in India. The business model of PayTM
from a recharge web site to a payment cum e-commerce marketplace. It has 100 million
Paytm Wallet users that carry out over 75 million transactions every month. China’s Alibaba
Group with its affiliate Ant Financial invested $775 million in PayTm in September 2016 to
raise their stake to 40%, taking its valuation at somewhere around $4 billion. On account of
higher valuation, PayTM had resources to stitch Rs.203 Crores worth of deal with Board of
Control for Cricket in India for 84 matches. Considering the quantum of following that
cricket has in India, this association with BCCI for primary sponsorship rights is sure to get a
lot of visibility to PayTM brand and likely to catapult it as a national brand with
significantly

26
high brand recall amongst all sections of society. "Digital Payment" segment in India
amounts to USD 28,961.6 million in 2016 and is expected to show an annual growth rate
(CAGR 2016-2020) of 18.36% resulting in the total amount of USD 56,837.5 million in
2020. In China, it has reached USD 833,358.4 million in 2016. The “Digital Payment”
market's largest segment in India is "Online B2C Commerce" with a total transaction value of
USD 28,718.5 million in 2016. To support this growth, the online payment services are also
witnessing tremendous growth trajectory. M-wallet market segment, which currently account
for a minuscule part of Digital Payments includes transferring of money, banking
transactions, shopping, ticketing, recharging, and bill payments is projected to grow at a
CAGR of around 30% in the next five years from 2015-2019. Some of the major m-wallet
players are Airtel Money, mRupee, Vodafone m-Pesa, Oxigen Wallet, Paytm, Mobikwik and
Idea Money.

Business models of paytm and freecharge a comparative analysis –

Both the companies started as mobile and DTH recharge companies with e-payment
as their core business, however, one chose diversification and the other did not. They
represent two strikingly different schools of thoughts when it comes to strategic planning &
marketing. PayTM visualizes brand building as a more concrete step in running the business
whereas FreeCharge focuses on giving greater benefits to its customers in the form of cash
backs and vouchers to retain their engagement. , PayTM clearly appears to be ahead of its
rival Freecharge in terms of customer base, unique visitors, revenue and valuation. Both the
Companies are doing well and have become giants in just 5 years since their inception. But It
is very difficult to decide which one is the right way to move ahead. PayTM’s revenues are
sourced from multiple avenues: interest received from Paytm escrow account, advertising
other products on its websites, annual subscription fees from different sellers, who list their
products on its website, commission from the seller for their products listed at paytm
websites. Free Charge is keeping it simple by not adding any products or services that dilute
its positioning. Vijay Shekhar Sharma, founder - CEO of PayTM , have called each other's
approach as 'flawed' . Shah in an interview to Hindustan Times told that combining payment
business and hawking (e-commerce) on the same platform as PayTM does is a 'flawed'
approach.

27
Some achievements -
1. "Alibaba enters India's e-commerce space with 25% stake in Paytm owner One97".
India Times. 6 February 2015. Retrieved 30 March 2015.
2. "Paytm valuation jumps to $1.5 billion". January 16, 2015 – via Business Standard.

3. Malik, Yuvraj (16 March 2017). "Paytm starts global expansion, launches app in
Canada". "Paytm, always bringing the Uber experience to you". #PaytmKaro. Paytm.
November 13, 2014.
4. "Paytm App Leaps on Google Play Store: Crosses 50 Million Downloads". News18.
Retrieved 15 November 2016.
5. "Thanks to demonetization, Paytm is making Rs 120 crore per day". Business Insider.
Retrieved 21 November 2016.
6. "Pay for Petrol With Paytm at Indian Oil Pumps". 8 February 2016. Retrieved 20 May 2016.

7. "Paytm partners with PVR Cinemas". The Times of India. 21 March 2016.
Retrieved 20 May 2016.
8. Goyal, Malini (15 March 2015). "How startups have successfully established their
own rules of hiring, rewarding & retaining talent". Times of India. Retrieved 30 March
2015.
9. Shu, Catherine (5 February 2015). "Alibaba's Financial Affiliate Takes 25% Stake
In India's One97, Owner Of Paytm". TechCrunch. Retrieved 30 March 2015.

10. "M-wallets may make hard currency history". The Hindu. 2 May 2016. Retrieved
21 May2016.
11. "Paytm, India's Largest Mobile Payments Platform, Acquires Local Services Startup
Near.in for $2M". December 7, 2015 – via TechCrunch.
12. "Paytm expands mobile wallet capabilities in India". Mobile Payments Today. 13
March 2015.
13. Varun Jain (17 March 2015). "Paytm takes Delhi Metro route to reach potential
customers". The Economic Times.

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Conclusion -
India is a home to almost 3100 start-ups starting per year standing just behind the US,
UK, and Israel according to the NASSCOM report of 2016. If the growth continues in the
same pace then it is expected that Indian tech start-ups will generate almost 2.5 lakh jobs in
the next five years. India is also said to enjoy demographic dividend and it is anticipated that
by 2020 India will be a home to 112 million working population falling in the age bracket of
20- 24 years as compared to that of 94 million workers of China. This demographic dividend
will definitely boost the start-up culture in the country.

The Prime Minister’s Start-up India campaign is a great initiative to boost entrepreneurship in
India. This initiative will play a very important role in further facilitating start-ups and
providing a new dimension to entrepreneurship in the country. The government must help
start-ups promote themselves, not just in India but across the globe, as well as create policies
that are start-up friendly so that Indian start-ups get a major boost and they can further create
better employment opportunities for the youth of the nation.

Suggestions –
1. The Government should enable easy availability of loans across the country.

2. The govt. should take some awareness programme regarding start-ups in rural areas.

3. Multi window clearances: Budding entrepreneurs have to make multiple trips to

government offices to register and seek clearances. Urgent need to scrap multiple regulatory
clearances.

4. There should be an Incubator assistance program that supports physical and virtual
incubation, government should be catalyst here, apart from the private ones.

5. An important factor behind failures and slow growth of some organisations is the lack of
quality mentorship, especially in terms of industry knowledge/support. So the govt. should
organise consultancy agency especially for start-up programmes.

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References –
1. The National Association of Software and Services Companies (NASSCOM) and Zinnov
2015 Report on Start-Ups

2. Graham Paul, September 2012, Start-up Equals Growth, in Grahams essays in Entrepreneurship.

3. start-ups.in/sights/on-getting-published/

4. Forbes India, Article on Start-up India, January 18, 2016.

5. http://yourstory.com/2015/12/india-100-top-start-ups-2015/

6. http://www.franchiseindia.com/entrepreneur/article/features/ecosystem/Can-
MSMEsperk-up- India-s-economic-growth-632/#sthash.2t3t6qkh.dpuf

7. http://economictimes.indiatimes.com/small-biz/start-ups/economic-survey-2016-
19000-start- ups-in-india-but-exit-options-remain-bleak/articleshow/51161562.cms

8. http://www.indianstart-ups.com/

9. https://www.entrepreneur.com/article/276764

10. http://evolve.iimkashipur.ac.in/role-of-government-in-encouraging-start-ups-in-indiaby-
roop- pratim-datta/

11. http://www.startmyownbiz.biz/2016/03/start-up-india-start-up-in-india-reviveeconomy/

12. www.indianeconomy.net/splclassroom/122/what-is-a-start-up/

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