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90% Indian startups fail within 5 years of inception: Study

Another report suggested that the number of IT startups in the country has slumped to 800 in the first nine months of 2017 from over 6,000 in all of 2016

July 09, 2018 / 08:11 PM IST

India has provided for a nurturing ground to numerous startups in the past few years but they are merely clones of Western ideas. The lack of technical innovation in India has led to venture capitalists restricting funding, resulting in slow decay of entrepreneurship in India.

A report by IBM Institute for Business Value and Oxford Economics found that 90 percent Indian startups fail within the first five years, lack of innovation being the main reason, News18 reported.

India is struggling to become the third-largest startup ecosystem in the world but it is leading towards more unemployment, as more and more startups are getting shut down.

Another report suggested that the number of IT startups in the country has slumped to 800 in the first nine months of 2017 from over 6,000 in all of 2016.

Lack of uniqueness

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The study, titled ‘Entrepreneurial India’, states that while the market evaluation of Indian startups has grown in the past four years, 77 percent of the venture capitalists believe they don’t have unique business models.

Rishabh Lawania, head of a market intelligence firm said, “Since 2015, as many as 1,503 startups have closed down in India. The major reason is due to the replication of Western business models, and not lack of subsequent funding from the investors.”

Logistics, e-commerce and food technology have seen the most number of failures.

India is a follower market, according to experts, despite artificial intelligence machine learning having been adopted in retail and banking.

India was among the bottom-most countries in terms of global innovation according to a global study. The report credited the failure in development to the bad condition of education in the country.

Ranking 66th on the Global Innovation Index (GII) list, it is believed that India can become a global driver of innovation because of its potential, talent pool and culture of innovation.

However, “relative weaknesses exist in the indicators for the business environment, education expenditures, new business environment, education expenditures and new business creations.”

A very clear indicator would be the number of international patents India has applied for. In 2015-16, India applied for 1,423 patents, while Japan’s count stood at 44,235, China at 29,846 and South Korea at 14,626.
Moneycontrol News
first published: Jul 9, 2018 08:11 pm

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