Superstars at home..Duds outside?
Why are Indian Startups incapable of scaling up to being Global Businesses?
As online beauty retailer Nykaa went public with the initial public offering (IPO) of Rs. 53 billion recently, its Founder Falguni Nayar joined the rare list of self-made billionaire women in the country. Ms Nayar’s story is inspirational, undoubtedly — A hallmark of the quintessential Indian entrepreneurial spirit.
But she isn't the only one if you look around in the budding Indian Startup ecosystem — Behemoths like Zomato, Flipkart, PharmEasy, Oyo, Ola have caught the fancy of local investors and media alike with newer success stories each day. What is constant though is the age-old question- Why are these domestic Superstars unable to carry their shine to the global stage?
Not that there are NO Indian companies with a global footprint. Mukesh Ambani-led Reliance Industries, Indian Government-owned SBI, Gems and Jewelry exporter Rajesh Exports, Ratan Tata-led Tata Motors have created some space for us on the Global Business map for sure. But these names are few and far between.
The usual suspects- China, the US and Japan dominate the global companies home country list. Giants like Walmart, Amazon, China National petroleum, Apple, Alphabet, Volkswagen, Toyota have knowingly ruled the roost for years together.
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What is the reason for the inability of Indian startups to replicate their success on a global level like an Amazon or a Google?
Are they too satisfied with the large audience that the local market offers — We are after all a 1.3 billion-plus territory leaving just 80% of the world to the other 194 countries! Maybe, the reason to diversify and spend time and resources expanding to the other 4/5th of the world seems like a poorer-ROI exercise.
Or is the competition so large internally that most companies do not find the wherewithal to look anywhere outside during their reasonably short life cycles? For the fear that they might end up losing both games if they spread themselves out too thin.
We ask and try to seek answers to an all-pervasive timeless question…
While we hear several announcements everyday, the truth is most startups fail to raise the capital they need to sustain and rapidly grow. They may have started with an ambitious budget for global reach but they often fail to anticipate the breadth of external markets and the depth required for a global-scale business model.
Unsurprisingly, Zomato recently shut down its global operations in the United States, United Kingdom, Singapore and Lebanon as well. Most of these operations were apparently loss-making for Zomato and hence needed to be pulled off the plug.
The lack of investment towards R&D, the dearth of unique ideas and pressure-tested models of working often adds to the perfect recipe for failure. A push from GoI (Government of India) to scale up through its policies like Startup India and so on is a fair step in the right direction — but is maybe too little too late for the ones that already learnt the hard way.
Indian primary markets recently opening up for early-stage investing may well function towards plugging this gap but how these funds are funnelled into the right channels and utilized for the correct upscaling is yet to be seen.
Innovation and Quality
India stopped innovating centuries ago perhaps and the copycat syndrome has ailed local business ideas too. Plagiarized ideas, half-baked go-to-market strategies, a lack or complete absence of a plan B often lead most Indian businesses to be mistrusted by their global target audiences.
The lack of required skilled workers, inadequate monitoring and poor business ethics makes the work culture undesirable for local employees who are the on-ground force for the company. And the perception that emerging market commodities are poorly built and inadequate for global consumer standards has not changed and perhaps even deteriorated over years of ‘jugaad’ business practices and ‘chalta-hai’ attitudes.
The one thing that enables large businesses to quickly launch a business line, innovate, scale up and sustain for longer periods is R&D. With Indian startups, the R&D is either non-existent or fairly basic. This coupled with a lack of long-term vision makes achieving scale difficult.
To be as successful as a Google or a Meta (aka Facebook), one has to think radically different and take risks that are unprecedented in the Indian context. Even our schools and colleges teach students the conservative approach while following conventional paths trodden by a million others. And our society emphasizes the need to ‘settle down’ in the quest for a happy life.
The lack of risk-taking ability and sportsmanship being infused from a young impressionable age keeps most young minds confined to the low-risk, low-return square of the matrix. Going beyond their limited thinking and pursuing new projects without being worried about failures is perhaps the way out for Startups here, of course, if implemented right.
Is there a solution in sight?
The days seem to be changing for Indian entrepreneurship, as there now seems to be a promising surge in its contribution to India’s growth.
Technological and structural advancements in the country, coupled with the recent Governmental support, the push towards skill-based education to enhance better manpower ability and support schemes(Make In India initiative and the likes)— has given startups an initial much-needed push to streamline their act for the next big leap.
The recent successes in pharma (pushed forward by the vaccine-related innovation), automobiles, consumer goods, telecommunications, energy sectors has perhaps given a doorway to several Indian companies that were thus far crouching in the shadows.
Collaboration is the other way to go. A Hindalco acquiring a Novelis, an ONGC acquiring an Imperial Energy and a Byju’s acquiring an OSMO could very well be the beginning of our desi startups understanding the fine balance of synergies in the mergers and carrying their way through to different geography with a company that already has its feet on the local grounds.
A steady local ecosystem to encourage the startups to go global is also a required incentive. This can come from private investors and governmental intent.
The globally strengthening Indian-origin political influences are definitely adding on the much-needed push. From markets like the US to the UK, Indian-born politicians and business leaders are becoming increasingly powerful and impactful on the world political scene.
The Prime Minister’s begrudged foreign visits have also diverted the attention of global media towards India and this PR could further be leveraged by Indian companies to have better global boardroom conversations.
Going beyond the one-person wonder is one of the key transformative steps which Indian startups could engender — right from the word ‘go’. While there are global star-leaders like Sundar Pichai and Jeff Bezos, there is also ample clarity that their companies are larger than the figure himself and will continue to grow and survive without the keyman risk.
Indian companies create and associate PR in an extremely founder-centric manner which can become difficult to replicate if the company wishes to foray into several markets outside at a time. The ‘Lala’ company outlook must now convert into quickly replicable and sustainable globally decentralized models of functioning- of course, the culture and values exuded by the founder-figure remaining a key guiding light.
The relatively shorter vision of the founding team is also a key drawback that now needs manoeuvring. Most founders start with an idea, develop it into a showcase-able prototype and raise funds to create a business model around it. As time progresses, the energies are spent focusing on raising the next round of funds over diversifying the business and creating it to be long-term sustainable for generations to come.
So, while the merit of one-time disruption cannot be taken away from Indian startups, the shortsightedness of founding a business from a pure perspective of selling it to a global giant someday and moving to the backseat cannot be overlooked either.
Indian founders are more focused on building a business to sell rather than building a business to run — which further takes them away from going through the trouble of diversifying geographically.
As India takes yet another decadal leap in innovation with its Make In India vaccine initiative and then takes it global with its vaccine diplomacy, perhaps this is time for Indian companies to take a hint again. India has proven itself for centuries with innovations that have metamorphosed the path of science centuries ago.
The lack of passion and vision to change the world and create a global disruption has perhaps got to change now with the current batch of founders looking at building businesses that transcend local issues and help take the world to the next level. Companies like Meta, Amazon, Alphabet, Space X are busy doing just that and hence have been able to gather ground faster in not just their own home countries but even abroad.
It is now time for Indian businesses to go beyond the cheap delivery and quick service labour-intensive concepts and look at real innovation that can disrupt existing daily routines for billions of people worldwide. This will be a more worthwhile dream for us than raking a billion dollars on over-hyped IPOs that don’t make sense to more than a handful of people at a time.
It is now time for Indian companies to take that quantum leap they are capable of but have been grossly underutilizing as others pass them by. Will the new-age Indian founder be able to dream that big? Only time will tell.
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