Startups – Answering the What, Why and When

Startups - Answering the What, Why and When
Startups - Answering the What, Why and When

What it is, Why it has become a “culture” and When this culture started blooming. All you need to know about startups from what it is and how it is different from small companies to the factors that are promoting the startup culture today.

When I hear the word “start-up”, my mind immediately creates the image of four tech-savvy people in denim, sitting in a circle in a casual setting, making hand gestures and typing on their laptops. They might have found a new problem that needs a solution and been working to find out the best possible solution.

They’re their own bosses and have nothing around them to control them. Sounds like the dream life. But is this what a start-up actually is? Are all start-ups about technology? Is it as easy and promising an initiative as it seems? Does a start-up have to be newly set up to be called a startup?

To answer all these questions and to actually make you feel how it is to be one of those four tech-savvy people and how actually they reached there, we bring to you a series of articles on Startups.

In this first article, we will mainly focus on developing an understanding of what startups are, how they work and funnily, what makes this concept so significant that we’re doing a whole series on them!

What is a startup?

According to Investopedia, “A startup is a young company founded by one or more entrepreneurs to develop a unique product or service and bring it to market.” Let’s study this definition bit by bit.

If we go by this definition, the purpose of a startup would be “to develop a unique product or service and bring it to market.” Now, what is this “unique product” we’re talking about? And what makes it unique? There could be two ways a product or service could be regarded as unique:

  1. The product is a solution to a unique problem i.e. either one whose solution has not been found or one which was just never looked at as a problem before. The latter seems a bit mind-tickling, doesn’t it? Well, let’s take an example — with the advent of this pandemic, many such problems arose. Did we ever think, educational institutes would require to take classes for students entirely online? But once we did realise the need, it was a problem that needed a solution. Hence, a unique problem, requiring a unique solution.
  2. The product is a better (and thus unique) solution to an already existing problem with already existing solutions. To take an example, let’s talk about companies like Uber and Zomato that started as startups. Delivering food was already possible before Zomato came up. But was it as efficient and easy? We all today, would much rather prefer to open the Zomato application and be done with ordering food in just a few clicks than calling up a restaurant, asking the person to read out their menu and all the hassle. Not to mention, the payment becomes easy through these applications and the hassle of finding change for the money etc. just vanishes!

Next comes the purpose of bringing it to the market. The reason that not every small firm is called a startup, sources out of this point. We will talk about this in the next section.

Every Small Company == Startup?

No, not every small company can be called a startup. Here, the aspect of “bringing the unique product to the market” comes into play. A startup is essentially a venture that is trying to develop its products, convince investors of the worth of its product and form a target audience of customers.

Once the product is fully developed, into the market and has created a large audience of customers, it is no longer a startup.

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Moreover, another important point that differentiates a small or medium business from a startup is its growth goals. The goal of a startup is essential to have exponential growth and generating top-line revenues in a short period of time. On the other hand, small businesses have a more long-term sight when it comes to growth and revenue.

To explain this with an example, let’s suppose you opened up a chemist’s shop. Your product is medicines which are already available in the market. You also already have a well-defined customer base.

Thus, it is not a startup. Generation of revenue is not going to be fast, and your growth goals would be more long term. You will probably only want to expand your shop once you start generating huge revenue.

The (not so) sudden rise of startups

While most people think that the startup culture in India is very new, but actually, it has not developed as sudden as people think it has. Ackansha Deoli, in her article on medium.com, says, “The rise of startups in India didn’t happen overnight, but slowly, over a gradual period. However, if one were to pin down the exact year the startup revolution took shape in India, it would be 2008.”

We know of the financial crisis of 2008. Firms all around the world had to reduce their number of employees and reallocate their resources. People from IT were greatly affected and a lot of them then sensed the advantages of being ‘self-employed’. Well, you might be surprised but it was during this financial crisis that some of the major companies we know of today, were born.

Zomato – the application that enables us to order food in a few clicks, was founded in July 2008 by Deepinder Goyal and Pankaj Chaddah. Flipkart – an online shopping application was founded by Sachin and Binny Bansal in 2008. Whatsapp – the easiest mode of online communication today, was founded in 2009 by Yahoo veterans Jan Koum and Brian Acto.

Byju’s – one of the biggest startups in the edtech sector was founded in 2008 by Byju Raveendran and Divya Gokulnath. Uber – the application that makes commuting as easy as anything, was founded in 2009 by Travis Kalanick and Garrett Camp. Pinterest, Instagram, Slack, Groupon are all startups that were founded during The Great Recession.

In addition to this, there are loads of other factors that have promoted the so-called “startup culture” that we talk about in the coming section. It has been so popular that the 2015 web series, TVF Pitchers was made with the purpose of capturing the zeitgeist of the Indian startup scene extremely well.

Top Startup Sectors in India

New ideas are being developed everyday in almost every field. We list down some of the ones that have seen the most growth in recent times.

Ed-Tech (Education Technology)

In a previous section, we talked about two kinds of problems that a startup can solve. For the first one, we discussed the example of how due to the unprecedented COVID-19 pandemic, educational institutions were faced with the problem of taking education entirely online. The solution to this problem was essentially solved by startups in the Ed-Tech sector. Coding Ninjas, Byju’s, Vedantu, Unacademy, Embibe, Udemy are all ed-tech startups.

Moreover, with the implementation of the New Education Policy, education is bound to be more technology-driven than before. One of New Education Policy’s recommendations is harnessing EdTech through app-based learning, online student communities, and lesson delivery beyond ‘chalk and talk’.

In addition to that, The Redseer Report 2019-20 points out that by 2022, online education offerings across grades 1 to 12 are projected to increase 6.3 times to create a $ 1.7 BN market, while the Post-K12 market is set to grow 3.7 times to create a $ 1.8 BN markets. This is going to create a meaningful opportunity for incumbent players as well as space for multiple new startups.

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Image Source: Business Insider

Fin-Tech (Financial Technology)

This sector i.e. that of financial technology, is one of the fastest-growing sectors in India. It focuses on making traditional financial exchanges better, more efficient and more convenient through harnessing the wonders of technology. The way they fulfil this purpose is what segregates the startups in this sector. Broadly fintech startups can be categorised as follows:

Paytm, BharatPe, ET Money etc are all parts of this sector. With the government of India focusing on making cashless transactions available to all through the ‘Digital India’ campaign, startups in Finance market, especially focused on digital finances, are growing rapidly.

According to the “Fintech Market in India 2020” report, the fintech market in India was valued at ~INR 1,920.16 billion in 2019 and is expected to reach ~INR 6,207.41 billion by 2025, expanding at a compound annual growth rate (CAGR) of ~22.7% during the 2020-2025 period.

The following graph shows how the number of digital payments per capita across India has increased by each year.

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Number of digital payments per capita across India from financial year 2014 to 2019

Image Source: Statista

HealthTech (Health technology)

In India, doctor to patient ratio in the allopathy sector stands at 1:1596 (far lower than the 1:1400 WHO standard) and the country is ranked 145 among 195 countries on the healthcare index [Source: inc42.com]. This piece of statistic, explains really well the potential that startups have in the health tech sector of our country. With the lack of enough medical professionals, the need for technologies like AI, IoT, etc. to improve health care facilities is immense.

Moreover, at a time when going to the hospitals is a risk in itself (thanks to the global pandemic), more and more people are looking for alternatives to in person consultation with their doctors and to going to the chemist for buying medicines. Startups like Pharmeasy, 1MG, Netmeds etc. have come in to make everything online and yet easier and quicker. The chart shown below depicts how much India’s healthtech market is growing by the years.

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Image Source: inc42.com

Factors that promote the startup culture

  1. Self-employment: NITI Ayog carried out a study in four states of India. It was found out that almost 80 per cent of the respondents from rural and semi-urban areas aspired to become ‘self-employed’ entrepreneurs. As we discussed in the previous sections too, rising from the shackles of mediocrity and aiming to change the world by taking risks is something that a lot of people aspire to do. Being employed in a company, working for it does not always give you that liberty.
  2. Government Schemes: In 2016, the Government of India, launched the Startup India Initiative that has helped to grow the startup environment in the country. With this initiative, GOI brought out more than 50 schemes to help startups. These schemes aim at easing the operations aspect of startups so they can focus on their product or idea. Schemes like Stand-Up India for Financing SC/ST and/or Women Entrepreneurs, help empower the less privileged sections of society to come up and fuel their ideas.
  3. Startup-friendly environment: We live in a time when the world craves new ideas and needs new innovations. Investors are ready to invest in an idea that promises to bring change. The atmosphere has never been better for startups. India has the 3rd largest startup ecosystem in the world (source: startupindia.gov.in) Moreover, the cost of the business in India is comparatively low and the customers and vendors live in close proximity. We cannot forget to mention that India has a thralling 696.77 million for the number of internet users in the country as of 2020 (source: statista.com). Therefore, reaching out to the correct audience is relatively easy.

Frequently Asked Questions

Are all startups about technology?

Without any twisty stories, the straight-up answer is no. No, not all startups are about technology. The reason why it seems like the opposite is because startups that do use technology have a wider reach. In fact, their way of reaching revolves around technology and with the number of internet users in our country and even worldwide, they end up being more visible than startups that do not have a presence online. Technological startups are just a small segment of types of startups.

What is the next article in this series about?

In the next article of the startup series, we’ll look at the story of some actual entrepreneurs and follow how they established their ventures. The challenges faced, how they tackled them, what kept them motivated, everything will be answered in the most interesting and insightful manner!

Conclusion

So by now, we have enough understanding about startups to conclude that the picture of startups we started this article makes a startup look way too simple and convenient a notion. In the next article, we will bring to you a startup story that will make you realise that it is persistence in efforts is the biggest parameter in defining a startup journey. Stay tuned!