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A few months back, while speaking at the Carnegie India Global Technology Summit, India’s most successful Internet entrepreneurs – Flipkart’s Sachin Bansal and Bhavish Aggarwal of Ola strongly voiced a concern relating to difficulties faced by Indian startups to compete with their foreign counterparts.
The Indian startups have to compete with the giant corporations which have very well established business in other countries and hence an easy access to more capital. This leads to competition based on capital dumping rather than innovation and user experience.
The Indian government is hugely promoting the startup culture in India. Today, than at any other time in the history of the country, it is easier to start and run a startup with numerous facilities and infrastructure including mentorship, funding and tax benefits available. But what happens once the startup grows and is left face to face in competition with a foreign giant – in most of the cases it is acquired by its competition, and the Indian startup story ends.
Can there be a better end to this story? Can we expect a scenario like that of China for the Indian startups where the competition wipes off the American company rather? Of course, we can and mind you without being protectionist or anti-WTO.
Industrial revolution moved the world in the 19th and 20th century. Many global companies of today developed during that time, but unfortunately, India could not take advantage of the same era due to the British rule. After independence, the government created Public Sector Units (PSUs) to primarily promote manufacturing sector for it was believed that only the government has the capability to manage such giant corporations both in terms of governance and finance. Until the late 90s, this was a highly regulated sector. Now, like the industrial revolution, startup boom is engulfing the world. It is the responsibility of the government not to let the foreign giants destroy this opportunity for India.
The solution is, like PSUs, the government should invest in Indian startups too. PSUs were termed as vehicles of growth when India secured its independence from the British. With time, many of these nationalized enterprises, like those in banking, oil and gas and heavy electrical, proved their worth.
It is now time that the government must shift its focus on the lucrative startup ecosystem that has produced giants like Amazon, Alibaba, eBay and Uber in foreign economies.
The Indian market too has potential with players like Flipkart, Ola and others proving their mantle. They alone, however, cannot fish in these troubled waters, hence h andholding them by buying strategic stakes can be a profitable bet for both the government as well as ailing Indian startups. The government should set up separate policies for the established startups of India. The government can set up a national fund like that of China to invest in selective startups which are already in the growing stage which will provide the much-needed capital and prevent these startups from dying a premature death at the h ands of their foreign counterparts. Policymakers, instead of focusing on the creation of new business alone, should also come up with means to help firms in the later stage of the business cycle to survive, thrive and grow.
While the above will solve the capital crunch issue, what is needed on behalf of our Indian startups is better service and user experience for ultimately no amount of capital can save a startup that cannot cater adequately to customers’ expectations.
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