Surviving The Fall

90 out of 100 start-ups fail — one of the start-up gospels that denizen of the start-up ecosystem incessantly preach. The problem? Despite being true, at least in India, it supports the failure narrative. But there is a bigger problem — the failure rate continues to be high even after around a decade of ecosystem evolution and maturing that may or may not be enough.

- Sandeep Soni

​​​​​

27,259 start-ups venture-funded between 1990 and 2010 (providing 1X return or less to its investors) in the US reported failure rate below 60 percent since 2001 as tracked by US-based investment consulting firm Cambridge Associates. In India, as per last year's study by IBM - Entrepreneurial India, 90 percent of start-ups fail within the first five years of existence. The high rate of failure has remained constant ever since the Indian start-up ecosystem came into existence. This is despite the steps taken to improve support structures such as funding, mentoring, talent, technology, regulatory requirements etc., over the years.

Weak Fundamentals

Predominantly, along with the mortality rate of Indian start-ups versus the US, the reasons too are vastly different. “Unlike India, in the US academia, entrepreneurs, and government actively connect with each other. Universities promote entrepreneurship and also serve as early adopters and customers for start-ups. In India, however even after 10 years, we still lack in the overall fundamentals because of such reasons,” says Suresh Jayaraju, Senior Director and Head 10000 Startups, Nasscom.

While Indian entrepreneurs are good at a few things such as resilience, hard work, finding right solutions but they are not well balanced. “Reasons right from the creation of a roadmap to having the right team and figuring out product problem, are partly due to lack of ecosystem maturity. Then, there are issues including talent and lack of collaboration between start-ups, corporate and investors, which don’t exist in the US,” he adds. This implies that India is still a resource-constrained society.