What is wrong with Indian startups?

There are a number of reasons why Indian startups fail the most important of which is a lack of funding. Startups fail to attract funds for a number of reasons. The problem of lack of funds faced by Indian startups is often a result of their founders’ inability to articulate their business model to the right audience.

Why startups are failing in Indian market?

Of the numerous reasons why Indian startups fail early, almost all are related to innovation and leadership: weak business models, poor planning, faulty customer insights, or lack of original ideas, focus, agility and tech capability, apart from leadership gaps.

Are Indian startups valued properly?

The valuations are rich, with growth always being the priority despite the shaky metrics. Even BYJU’s, India’s most valued edtech startup, has a 12 billion USD valuation with about 700 million USD expected revenue (6). While the numbers are aggressive, they are still far lower, multiple of 16 to 17 times.

How much money does a startup need in India?

Bhide says that most Indian firms in his study required an average startup capital of about Rs 375,000 ($8,300), whereas the average (non-IT) US startup needs about $10,000. With purchasing power benchmarks, Indian firms shouldn’t need more than about $1,500-$2,000 equivalent as startup capital.

Do startups need to be profitable?

Startups never needed to become profitable. The only time when a business is driven by profitability is when the company is public and shares are sold on a public stock exchange. Profitability tends to correlate to Share Holder Value and public companies are fiscally responsible to shareholders…

What happens to investors money if startup fails in India?

For example, it would collect on outstanding accounts, apply those payments to any outstanding debts, liquidate assets to pay debts further, then start paying back any and all investors who contributed money to the startup. In many cases, venture capital investors and other investors will end up with a loss.

What causes startups to fail?

Pricing and costs. Other problems with many startups arise from difficulties in calculating a price that is high enough to cover costs but low enough to attract customers. After all, 18 percent of the companies in the CB Insight study cited profitability issues as the main reason for failure.

Are Indian startups in a bubble?

Therefore, at the broad level, there is no evidence of a funding bubble. After 10-12 years of investing experience, the India-focused venture capital firms continue to raise funds and invest further in Indian start-ups. In 2020 they raised over $3 billion to invest in Indian start-ups.

How is valuation done for startups?

The various methods through which the value of a startup is determined include the (1) Berkus Approach, (2) Cost-To-Duplicate Approach, (3) Future Valuation Method, (4) the Market Multiple Approach, (5) the Risk Factor Summation Method, and (6) Discounted Cash Flow (DCF) Method.