A Study On Sustainable Business Models Across The Consumer Internet Start-Ups In India

India is the 3rd largest startup ecosystem in India and around and is home to more than 72k startups and around 108 Unicorn (with valuation of over $ 1 Billion) startups amongst them. 22 Indian startups entered in the Unicorn Club in 2022 itself and as per The Economic Times, Indian startups are believed to raise $24.7 billion in 2022 itself.

These young startups are disrupting markets like anything and most of them are working in B2C segment. In fact, if we look at the highest valued startups most of the consumer Internet companies top the charts. In terms of customer acquisition, leveraging technology, driving marketplaces into a new direction, and attracting investor’s money, Indian startups have done well in the cipf-es.org Past.

If we look at other environmental factors like India being one of the fastest growing economies and being the fastest growing developing economy, clubbed with other encouraging factors like Increased consumer spendings and demographic dividend (More than 60% of the population in 18-50 age group) etc, India undoubtedly is a very promising market and hot destination for startups and Investors and will continue to do so in future as well. Currently With a $22 billion valuation, the e-learning platform Byju’s is currently the most valuable unicorn in India. It won the top rank after One97 Communications, the company that created Paytm, went public last year.

But all that glitters, is not gold. Let us look at the other side as well. Only 22 Indian startups entered the UNICORN CLUB in 2022 as compared to 44 in 2021. Venture capital (VC) investments in Indian startups plunged over 38 per cent in 2022 as economic uncertainty and market volatility affected fundraising and investment activities, as per a report by Global Data (Published in Business Standard).

Investors across the globe are becoming more cautious before investing now. In fact, some believe that high valuations of Indian startup were overestimates and this trend of overestimation along with the overflow of venture capitalist’s money will slow down and will hurt startup ecosystem in the years to come.

With around 90% failure in startup space, lot of startups fail to continue their operation due to multiple factors. For any entrepreneur, maintaining a startup is arguably the most challenging stage. Even the most resilient people find the uncertainty and constant pressure to succeed to be a great responsibility. Everyone promotes entrepreneurship as a quick way to make money and get rich but it is easy said than done.

Some key factors that generally causes startup failure are:

• Lack of Vision
• Me too ‘Product’
• Inadequate Capital
• Wrong Market Research
• Improper business or revenue model
• Operational Challenges
• Outcompeted
• Govt. Norms
• Other Environmental Factors

A small mistake or miscalculation can lead a startup to disastrous results. Sustainability of any startup can be assured only after avoiding the abovementioned mistakes and counting on the points given below:

1. Strong market research is a must before and after the launch of the startup. Correct market analysis and gap analysis must be done before the launch and proper checks and controls must be exercised thereafter. The team must always aspire to gain better customer and market insights and must be ready to adapt change as and when required.

• The offering must be a real problem solver. If we observe closely there are hardly any startups around us who invented something rather, they feed themselves on Innovation (E.g., CRED, Zomato & Flipkart etc.). All these startups played their game around Innovation and became a big hit after solving real problems for e.g., Flipkart came up with the idea of Cash on Delivery (COD), It was an instant hit because Indian customers were sceptical about ordering online and they did not prefer paying before they receive the product they ordered for. The offering must solve a real problem and should be able to do it over the period.
• First mover advantage is something that every founder aspires for but it comes with a condition; Followers learn from the mistakes of the first mover and improve themselves over the period but first movers don’t have that luxury. So, the launch timing of a startup makes a big difference. Too early you are and the customers will not except you’ too late you are and the customers have already moved to something else.
• Operational costs skyrocket in the initial few years and they business must be able to deal with that. Constant inflow of capital and operational excellence can only keep the business going.
• Strong leadership can never be avoided or overlooked. Smart leader can do wonders and turn the world upside down for any business entity.
• Rome was not built in a day; hence, the founders must not get impatient to take the startup to the next level without thinking long term consequences. Nobody hates growth, but slow and steady wins the race.
• Leaders alone cannot make the business run so investing in the right team is very much essential and too at right time.

List is endless, but these few points must be on the checklist of any founder.

Prof. Mudit Tomar
Assistant Professor, GIMS, Greater Noida
Ph.D.(P), UGC-NET (Management), UGC-NET (Commerce) PGDM, M.Com.