Ideas Take Center Stage in India's Booming Startup Ecosystem

Ideas Take Center Stage in India’s Booming Startup Ecosystem

I will build the McDonald’s of India!

The business bug bit Eshwar K. Vikas fresh out of college. He launched Mukunda, a restaurant serving idli and dosa in a shopping mall in Chennai, borrowing from relatives and friends to rent the space and set up a self-service model with large screens and lighting LEDs. He bought the batter from someone else and embarked on his “McDosa” dreams.

Ambitious, innovative and straddling technology and easy financing, people like Eshwar are driving an entrepreneurial revolution in India.

Today, parents come to see me saying “my son is doing a startup”. When I talk to them about the possibility of failure, they say we’ll look for a job then! —Padmaja Ruparel, Founding Partner, Indian Angel Network

“Business was good from day one,” recalls Eshwar. So much so that he committed the blunder of his career: a second outlet on a franchise model through a friend. “That’s when I realized we weren’t able to maintain hitting consistency,” he said. To add to his misfortunes, the “master dosa”, the kitchen guy, is gone. Customers stopped coming back, complaining that the quality had gone down.

An engineer, Eshwar wanted to solve the problem by obtaining a machine capable of manufacturing dosas in a uniform manner. The problem? There were none.

He didn’t give up. He refashioned an Archimedean screw, used to pump concrete mix in construction, into a pump for dosa paste. One person was assigned to design and manufacture a tawa (wok) for the machine. And presto, Eshwar had gone from running a “manual” restaurant to an automated kitchen.

Today, Eshwar is the go-to man in kitchen automation and robotics, with his DosaMatic, Eco Fryer, RiCo and Wokie machines used to make dosas, rice, noodles, momos and curries without human intervention. In the last funding round two months ago, by the likes of Zomato, who would use his machines in his 10-minute delivery, he raised about Rs 60 crore. Driven by demand, Eshwar turned to running micro-cloud kitchen factories, where he runs machines in one place, uses ingredients sourced from multiple brands, and delivers through agents. by Swiggy and Zomato. “Kitchen automation is slow growing, but kitchen as a service will grow very quickly,” he said.

Ambitious, innovative and straddling technology and easy financing, people like Eshwar are driving an entrepreneurial revolution in India. It’s being fueled by massive inflows of cash from overseas investors, and it looks like even a recent cut in that stimulus-focused funding won’t slow India’s date with the business virus. .

“Fifty-three million young people are the future,” said Dharmendra Pradhan, Union Minister for Education, Skills Development and Entrepreneurship. “They will have to become employers to make India an entrepreneurial economy.”

The number of Indian unicorns – startups valued at over $1 billion – crossed the 100 mark at the start of the summer. This makes India the fastest growing startup ecosystem in the world, and also the third largest, after the United States and China. Indian Angel Network, a company that invests in startups, said it received 30 funding applications in 2006, the year it was founded; today, he receives 75 a day.

Last year, about Rs 28,000 crore was invested in private startups, of which about 400 got the money from first-time investors. A bank loan or a gift from parents is no longer the only source of funding for a business with a good plan. The explosion of private investors, angel funds and venture capitalists has ensured that there are multiple sources that a sharp mind with a brilliant idea can tap into.

“Now is a great time to be an entrepreneur in India,” said Vikram Gupta, founder and managing partner of IvyCap Ventures, one of India’s leading venture capital firms. “Discover how Zomato created value without generating profits. The questions of “how can a startup be valued at a billion and not even have a profit” have already been answered.

The rush of ordinary Raj and Rahul (and his IIT mate) to become entrepreneurs is surprising, as getting a salaried job has always been seen as a better option in India than the risky proposition of starting your own business. Padmaja Ruparel, founding partner of Indian Angel Network, recalled how her parents told her to look for a job when she started her business. “Today parents come up to me saying ‘my son is doing a startup,'” she said. “When I tell them about the possibility of failure, they say, koi baat nahi, we’ll get a job then!”

The tipping point may have been the economic reforms of 1991. Gone were the quota and licensing rajs, and the entrepreneurial spirit flourished. While the first wave had existing business owners expanding their coffers or multinational biggies making their presence felt, the dot com boom and e-commerce explosion made it all real for ordinary aspirants. Governments, too, have become proactive, offering funds and seeking out startups with innovative solutions to problems.

Somewhere along the way, failure became a springboard for learning, rather than a dead end. “Entrepreneurs today are not afraid of failure and are looking to build world-class businesses from India,” said Vishesh Rajaram, managing partner of Speciale Invest, a start-up venture capital firm.

Education has also played a role, with many private universities and coaching centers focusing on practical training and the creation of entrepreneurship cells. “We are slowly moving away from job-seeking education towards skills-based education focused on entrepreneurship,” said Ashish Munjal, co-founder and CEO of Sunstone, a higher education group.

Yet the real catalyst for change has been technology. “Technology helps you accelerate your business and your execution,” said Manish Rathi, co-founder of bus operator IntrCity. “The idea is still at the heart of it all, but technology has simplified it.”

He should know. While some of the large private bus companies took decades to build a fleet, IntrCity took roughly two years. “What are we doing different? Technology,” Rathi said. “Traditional businesses depended on trusted hands, usually relatives, to oversee new branches or inventory as businesses expanded in other locations. For us, it’s just technology. We are able to add 50 new buses per month as technology helps us monitor and track performance. »

“Technology is the only way to reach large numbers of people faster,” said Vikram of IvyCap. For investors, this is even more important – a business that can scale quickly using technology is very attractive, as a typical VC would be looking to cash out in a few years.

The startup funding process works both ways. Anyone, from international investors like SoftBank and Tiger Global to local funds set up by families or businesses and even Union ministries and educational institutions, are ready to invest in startups that interest them. Funding also runs the gamut, from early start-ups (first time) and angel investors (providing mentorship to startups that have just started operating) to multiple rounds, which are labeled Series A, B, C and so on. Some companies then later venture into the stock markets by opting for an IPO.

Investor Arjun Vaidya breaks it down: “50% depends on the founder, the person or people behind a startup. We seek to find out if they will be resilient when the going gets tough and if they are in the best position to solve the specific problem at hand. The rest he breaks down at 8:30 p.m. between whether the market for the product or service is large enough and the rest on business metrics, ranging from sales, growth velocity, gross margin, profitability and members of the team.

Of course, it helped that the last two years had investors full of money looking for opportunities. This was fueled by the excess money pumped into the system as a post-Covid stimulus measure by countries like the US and Japan, which entered India. However, with rising interest rates, particularly in the United States, this easy liquidity is bound to be reduced. Does that mean the ride is over?

“A lot of startups will struggle,” Indian Angel Network’s Ruparel said. “[But] an investor will always look for good opportunities. A good company is not only synonymous with growth. Problem-solving products and excellent entrepreneurs will always find takers.

The confidence of Indian startups can also be seen in their trajectory. Previously, startups built products for the US and other Western markets. Then came the big game with the likes of Swiggy, PayTM, Byju’s and others, where entrepreneurs built products for the Indian market and scaled them successfully. And now Indians are building products for the global market, be it fintech, space or defence.

“We have the potential to become the hub of the global startup ecosystem – we’re diverse, large in land space and demographics, and we have the buying power,” said Vikram of IvyCap. “These are great ingredients for startups to come here and build businesses.”

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