Young companies in the world’s third-largest startup ecosystem are grappling to make money.
Unprofitability was the main reason Indians shut their businesses in 2015-16, a survey of over 3,400 entrepreneurs has shown.
The survey, conducted by research consortium Global Entrepreneurship Monitor (GEM), included entrepreneurs aged 18-64 across 23 Indian states.
Other reasons for discontinuing businesses “by selling, shutting down or otherwise discontinuing an owner/management relationship with the business” were personal reasons and lack of funding.
Despite attracting global investors and favourable government policies, even Indian unicorns like Flipkart and Ola are far from reaching a break even after nearly a decade of being in business.
However, that has not deterred the lure of entrepreneurship, the survey showed.
The GEM survey found that 39% of Indian adults consider entrepreneurship as a desirable career choice, and believe it provides high self-esteem and status in society, among other things.
Nearly 11% of the adult Indian population is currently engaged in some form of early-stage entrepreneurial activity, the survey showed. Almost four in five early-stage entrepreneurs in the country—the highest among BRIC (Brazil, Russia, India, China) economies—were drawn to entrepreneurship due to business opportunities.
However, the businesses that did fail are proof that the spirit alone isn’t enough to sustain a venture.
There is a dire need for infrastructure to encourage budding companies in India. The survey recommends that the government strengthen regulation of “entry and barriers to growth, availability of liquidity and capital, labour market, R&D (research and development), commercialisation and knowledge spillover, taxation, intellectual property rights, and bankruptcy.”