All about start-ups

Who doesn’t know about start-ups? Most of us have come across this new age term someday in our lives. Ola cabs, Zomato, FreshMenu, Cure.Fit, Razorpay, Vedantu etc. are the famous start-ups in India. Start-ups are spread into a large spectrum and gaining more popularity day by day. 

Have you ever wondered why is it called a start-up? A start-up refers to a company in the first stages of operations. It is usually founded by one or more entrepreneurs wanting to develop a product or service which according to them is in demand. These are the companies with higher costs of running and limited amount of revenue. That is also the reason they look out for capital from a variety of sources like venture capitalists. 

Until the business gets off the ground, it needs to be financed by its founders which make them rely on investment largely from outside.  This could include crowdfunding, loans, family and friends. The founders decide about the area of operations and its legal structure.

The past and present of Start-ups in India

Silicon Valley is known for start-ups. Dotcoms were a common start-up in the 1990s. The Indian start-ups initiated with software services, serving Indian software needs. The founders were those who had some experience in Silicon Valley and moving back from there to India. Many of these have now grown into some of the largest and most successful companies founded in India. 

India’s current entrepreneurial ecosystem is a result of three waves of activities with distinct focus areas like-Information Technology, consumerism, and innovation. The first wave had IT as its predominant factor. 

The second wave brought the start-up expectations. It also marked many me-too platforms and aggregate models. 

Next level was hit when it matched with the global ecosystems.  More start-ups building unique products and solutions. Now there is shift towards B2B models.

This being considered as the third wave also included marketplaces, e-commerce vendors and portals. The fourth wave of start-ups began around 2007-08 and consisted of logistics and advertising start-ups too. 

In 2010 came the SaaS companies selling the products in the US and Europe. Now is the time for business simplifying start-ups like GroMo, fintech start-ups etc. The edtech are predicted to be the future of start-ups.

How to launch your own start-up business?

You may have a dream to have your own start-up business. The steps discussed here could be of help:

1. Make a business plan.
2. Get proper funding.
3. Choose the right people.
4. Decide about the location and get your own website.
5. Do marketing like an expert.
6. Create customer base.
7. Be ready for any outcomes.

Why are non-profitable start-ups still getting funded? How do they survive despite of losses? 

Expected growth projections of the company makes it run as investors keep investing in them. Facebook was launched in 2004 and till 2011 it did not serve ads and was working without money. It is the habit which they want to develop among large groups of people. Once the people get used to it, they get more funds to run the business.  

There are many such examples like WhatsApp and Uber. Amazon also runs on the same concept.  It  offers cheaper products and thus  stays in competition by increasing  sales.  Amazon invested smartly in other areas like AWS and product search. 

When Google started it was a start-up and did not earn a single dollar for a period of three to five years. It tried to build a habit in people to use their service. Other sites had banner, ads, pop ups and other annoying displays that Google did not have. This made it the most popular search engine today.

When a private enterprise suffers losses for many years, the government steps to pull it out from the state of despair. Government can absorb the losses as many government undertakings are run despite of losses. 

Privately owned start-up units are run with a goal to make profits. They also want to maintain their margins and returns. But that seldom happens. A venture capitalist or an IPO can come up with funds. Now resorting to an IPO is only possible when the business has created enough customer base/ demand for services. 

Continuous expansion of business and competition from rivals forces start-ups to keep the pricing strategy minimal. Start-ups like Flipkart, Zomato, Ola have not booked profits yet. All they need is a brand value, the service or goods that they offer or the way they offer should make the masses depend on them and ultimately they will succeed in getting funds according to their value which is a sum total of all the efforts they put in. 

What is Startup India and 11 benefits that are offered by the Indian Government:

#startupindia is an initiative by the Government of India for generation of employment and wealth creation. The main aim of it is the development and innovation of products and services and increasing the employment rate in India. The campaign was first announced by Indian Prime Minister, Narendra Modi during his speech on 15^th August,2015.

Benefits offered by the above scheme are as under:

1. Simple process
2. Reduction in cost
3. Easy access to funds
4. Tax holiday for 3 years
5. Eligibility to apply for government tenders
6. R & D facilities
7. No time-consuming compliances
8. Tax saving for investors
9. Choose your investor
10.  Easy exit
11. Meetings with other entrepreneurs

2021 has prospects for many upcoming start-up opportunities both in products and services like- AI, Ecommerce, EdTech, Fin Tech, Food and Beverages, Health care, Blockchain, IoT, Software and SaaS, Transport and Travel, Mobile Apps and Fashion.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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