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Rohan Shravan was 24 years old when he founded Notion Ink, a <keyword id="138263" type="UNKNOWN" weightage="100" keywordseo="startup">startup</keyword> that designed India’s first tablet computer Adam. The device was launched five months before Apple placed the first version of the iPad on store shelves. 
 
At its international debut in the Consumer Electronics Show at Las Vegas in January 2010, one of the first to place an order for Adam was an employee at Apple headquarters in Cupertino. However, in the ensuing months as the iPad gained iconic status, Adam dropped by the wayside, felled by the lack of risk capital to grow the business. 
 “When I told venture capitalists that our product will be a challenger to <keyword id="10591" type="CITY" weightage="40" keywordseo="Samsung">Samsung</keyword> and Apple, they laughed at me,” said Shravan, a mechanical engineer from the Indian Institute of Technology in Kharagpur who initially bootstrapped the firm with personal savings of around Rs 6 lakh. 
 
Shravan’s experience is hardly unique. In the midst of an unprecedented entrepreneurial boom, several of those starting up say there are more hurdles than advantages in the Indian startup sector. Apart from the red tape and the lack of policy support there is also a shortage of true risk capital that can back edgy new ideas. 
 
Customers are unwilling to pay for untested products and many entrepreneurs choose the middle path fearing failure. “I was very aggressive, arrogant and fought like a warrior, the so-called experts advised me to tone down and be nice, which led to our downfall,” said Shravan who trained engineering students to work on Adam as a way to minimise staff costs. “Around 80 per cent of the employees were final year students; they were later snatched by Samsung and Motorola.” 
 
In recent years, several ventures including short messaging service GupShup, personalised news service Frrole and language keypad maker Luna Ergonomics have altered business models when faced with regulatory hurdles or the fear of rejection from investors and customers. 
 This at a time when many global technology companies including WhatsApp, <keyword id="6354576" type="CITY" weightage="40" keywordseo="Facebook">Facebook</keyword>, caller identification service Truecaller, home rental marketplace Airbnb, and question and answer site Quora count India as one of their fastest growing markets. 
 
Nearly 40 million of WhatsApp’s global user base of 450 million is in India. “India is our largest market with about 30 million users and continues to demonstrate great opportunities for us,” said Nami Zarringhalam, cofounder of Sweden’s Truecaller. When Amarpreet Kalkat started his company Frrole in 2011, he wanted to build a product that was tailored to a user’s area of interest. 
 
“I believed it could rival Google News,” said the 35-year-old entrepreneur. Eight months later, Kalkat started looking for funds and he had to answer the dreaded question, over and over again: “How do you make money?” Two years of running the company without external funding almost made him bankrupt. Kalkat was forced to start a new by changing his model to an enterprise product. 
 
At about the same time when Frrole was launched in Silicon Valley, a text and photo sharing app called Snapchat was born. It received $60 million (Rs 361 crore) in initial funding and was handling 150 million photos every day. 
 
Last year, the company rejected a $3 billion (Rs 18,000 crore) buyout deal from Facebook. “There is a very high chance that Frrole would still have been a social newspaper, if we were based in Silicon Valley,” said Kalkat whose company now has a dozen of enterprise customers. 
 
Parag Dhol, managing director at Inventus Capital Partners, said he has some sympathy with the entrepreneurs’ point of view. “But let me throw the question back at them—let us find at least one product from India where there are at least 100 million users,” said the investor who has backed firms such as Savaari Car Rentals, online bus ticketing site redBus and technology company TELibrahma. 
 
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Angel investor Sharad Sharma, who pushed Kalkat to alter his business model, is of the view that in Silicon Valley entrepreneurs can afford to not have a paying business. “Because they have the confidence that they will get bought over, here there is no such scene. It’s all about viability of the business,” said Sharma who participated in a $245,000 angel (Rs 1.4 crore) funding round in Frrole this April. 
India has a far worse ratio of venture capital exits as compared to Israel and the US, according to data compiled by think tank iSpirt and investment bank Signal Hill. Few large companies are interested in buying out startups or using their products, impeding growth of local companies. 
 
“We had all the ingredients to become a large global company,” says Abhijit Bhattacharjee, 43-year-old founder of Luna Ergonomics, the maker of the Indian language keypad Panini. 
 
Named after an ancient Sanskrit grammarian, the technology makes it possible to type quickly and easily in all Indian languages on the mobile phone. The company which has received patents for its Korean language interface did not find takers amongst Indian telecom companies. 
 
“Supporting Indian scripts on digital devices does not suit the strengths and roadmaps of these companies,” said Bhattacharjee, whose company last released an Urdu keypad for iOS, Android, and PC in 2013. “Which large enterprise buys cutting edge technology from startups? When there are not early customers, how can you expect to have $1 billion companies?” asked Ashish Gupta, a senior managing director at Helion Venture Partners that backed group text messaging service GupShup. 
 
The Mumbai-based firm was launched just six months after microblogging site Twitter was launched in the US in July 2006. Within a year of inception the service had racked up 15 million users. 
 GupShup was a free, social, short messaging service that allowed users to communicate and connect with family, <keyword id="343" type="ENTERTAINMENT" weightage="40" keywordseo="Friends">friends</keyword> and followers using ordinary mobile handsets. But the telecom ecosystem and policies were a problem. 
 
“The regulations did not allow advertising. The operators kept the short messaging service rates high,” said Beerud Sheth, cofounder of Webaroo maker of GupShup product. The company had to shift focus from retail consumers and instead offer the messaging platform for enterprises. 
 
“They (government) should invest money in big ideas. They need to stop protecting big industries and start encouraging disruption and risk taking,” said Rahul Sood, partner at Microsoft Ventures and a technology entrepreneur, who sold the luxury computer business VodooPC to Hewlett Packard in 2006. 
 
Compare this to China, where the startup ecosystem is accelerating faster than anywhere in the world. There are around 1300 incubators and accelerators across the country compared with about 35 active accelerators in India. Shravan of Notion Ink has not lost hope yet. 
 
The entrepreneur is placing another bet. This time a personal computing robot called EVE, which he thinks will disrupt the market and will be in the market by 2017. “I will be jealous of my kids, they will be enjoying the rewards our hard work and same is true for the next generation of entrepreneurs,” he said.

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Indian Startup Sector: Why New Businesses Face More Hurdles Than Advantages

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