77% of Venture Capitalists in IBM “Entrepreneurial India” Study Believe that Indian Startups Lack Innovation

IBM recently released an entrepreneurial study conducted by the IBM Institute for Business Value based on a survey done in collaboration with Oxford Economics, to understand the rapidly evolving India startup ecosystem and its effects on the wider economy.

The results reveal that startups can exploit a range of attributes and advantages unique to India. More than 76% of Indian executives pointed to India’s economic openness as a major business advantage, while 60% identified India’s skilled workforce and 57% of the executives said that India’s large domestic market provides significant advantages.
The IBM study, “Entrepreneurial India” is based on interviews with more than 1,300 Indian executives, including 600 startup entrepreneurs, 100 venture capitalists, 100 government leaders, 500 leaders of established companies and 22 educational institution leaders to analyze the macro impact of startups on the economic growth of the country.

The study further focuses on how more proactive engagement between startup and established organizations can help startups harden their business models, accelerate growth and leapfrog into the big leagues, while enabling established companies to share in the entrepreneurial spirit of innovation and agility. Their mutual success will drive India toward an ever-more dynamic future. Startup activity is driving India’s emerging business ecosystems

India’s startup community is expanding rapidly with a strong entrepreneurial culture, especially among millennials. Strong government promotion of entrepreneurship has strengthened a rapidly evolving startup culture – a proposed reduction in corporate tax from 30% to 25% is expected to further boost startup activity. The study further stated that market valuation of Indian startups has grown significantly over the past four years, with three times increase in startup investment recorded in 2015. According to the study, approximately 35% of startups are being set up in tier two and tier three cities, thereby promoting accelerated development and industrialization of rural and other less developed areas.
Top roadblocks for India’s startups

Despite India’s entrepreneurial strength, the startup economy still has not reached full maturity and more than 90% of startups fail within the first five years.

Lack of innovation: 77% of venture capitalists surveyed believe that many Indian startups lack pioneering innovation based on new technologies or unique business models. Indian startups are prone to emulate already successful global ideas.

Lack of skilled workforce: 70% of the venture capitalists believe that talent acquisition is one of the biggest challenges faced by Indian startups, and limited availability of necessary skills impedes growth. As per a study, 80% of engineering graduates in India are deemed unemployable and 48% of employers in India face difficulty in filling vacancies.

Lack of sufficient funding: Indian startups face funding roadblocks both at entry and exit stages while successful global startup ecosystems are well supported by active investor communities. 65% of venture capitalists revealed that funding is one of the major challenges for these companies.

Other roadblocks include inadequate formal mentoring, poor business ethics and lack of experienced leadership.