Most Startups in India use Cloud and Mobile Technology
A majority of Indian start-ups in 2012 catered to individual customers, with most entrepreneurs adopting mobile and cloud computing technologies to build their businesses, according to a study by Yourstory.in—an online platform for start-ups and entrepreneurs.
The “State of Indian Tech Start-ups” survey was based on responses from more than 400 enterprises across six cities—Ahmedabad, Mumbai, New Delhi, Hyderabad, Chennai and Bangalore.
The start-ups had to be at least four years old and have a product business in place besides having feedback from customers to qualify for the survey. Around 28.5% start-ups targeted the “consumer web” with products and services for online commerce and content, and catered to individual customers, according to Shradha Sharma, founder of YourStory.in.
Start-ups catering to the mobile sector accounted for 21.6% of the total companies surveyed while those targeting the education and e-commerce sectors came in next with 16.6% and 14.1%, respectively.
“Entrepreneurs are realizing these products can work out well globally and cloud has been a big enabler,” she said. Nearly 34% of the start-ups surveyed said they were actively using the cloud (a metaphor for Internet-based computing that allows users to access content on demand and anywhere) to power their main product.
Young Indians, according to the survey, are also comfortable with the idea of entrepreneurship, with nearly 34% of the start-ups having just one founder. The average age of an entrepreneur is 25-30 with work experience of up to five years. However, there are challenges too with nearly 80% of the entrepreneurs saying the Indian start-up ecosystem is not supportive enough and needs help with marketing and fund raising, according to Sharma.
A majority of the start-ups are also looking for investments. According to the survey, nearly two-thirds of the companies surveyed were looking for an investment, with 41.5% of start-ups looking for investment at the angel stage (high net worth individuals who back start-ups). Only 6% of the start-ups were looking for their second or third round of funding.
When it came to an exit strategy for start-ups, a majority wanted to simply grow to be a profitable company. Around 9.4% of the companies were looking for a buyout, while 12% were looking for an initial public offering (IPO) to create an exit for their founders and investors.
Bangalore continues to be perceived as the best city for a start-up with more 34% of the respondents identifying it as the city of choice, citing low rentals, the presence of investors including venture capitalists (VCs) and angels and the availability of ample technical resources.
“The cost of starting up is not very high in the consumer web space as applications can be hosted on the cloud infrastructure available today,” said Deepak Srinath, director of Bangalore-based boutique investment bank Viedea Capital Advisors Pvt. Ltd. He added that since most entrepreneurs have applications and features and not products, investors tend to question the scalability of such offerings for making money.
“It is difficult to forecast how they will turn into sizeable businesses and make money by offering apps and features. This is a challenge for angel investors,” he said.