Start-ups with innovative tech savvy ideas are aplenty off late.
But the impact on the economy & their sustainability isn’t as significant as is being touted.
Can start-ups really impact the economy?
Some folks assert that currently start-ups are India’s hope to stimulate employment and spur national economic growth.
Digital technologies are disruptive and important.
Some of them will surely impact India’s health care and education access issues in the long run.
However, it is unwise to expect nascent start-ups to shift the national metrics significantly in the near future.
Why aren’t Start-ups the hype they are made out to be?
Start-ups are abnormally growing corporate organisms.
They are rooted to short-lived impatient capital and inexperienced entrepreneurs slugging it out with venture capital money.
The craze is mainly being fuelled by the emerging hippy attitudes and the availability of investors in plenty.
At least in India, Start-up ecosystem comprises largely of copycat firms, most being unstable and unsustainable.
How is this a new trend?
Even a decade ago, investments weren’t all that easy to come by and start-ups were rarer but with more concrete ideas.
Hence, the “old start-up” companies like Infosys and Bharati, spent hard-won investor’s money frugally to prove their business model before undertaking rapid growth.
Three decades ago, even during their infancy, these companies grew credibly with revenue, cost and profit surplus.
On the contrast, current start-ups measure performance through unintelligible metrics such as gross merchandise volume, app downloads and merchants on the platform.
The output numbers that we see at present are mere valuations of and not their business performance.
How is the craze affecting public policy?
The inexperienced start-up entrepreneurs are called upon to advise on the nation’s economic policies.
Policymakers should indeed listen to entrepreneurs but it would be more prudent to listen to those who have a record of solving real consumer problems and generating jobs.
A small number of today’s start-ups will indeed get there, but the time frame will be a decade or more.
What is the way ahead?
Young entrepreneurs need to be experimental and bold.
We need start-ups that eventually mature with a strong standing.
But the current focus should be on the prime movers of the economy to address issues at hand.
In the next decade and more, economic growth and job creation require renewed industrial investment and a revival of agriculture.
These are the sectors were the cycle of production and consumption is based on real revenue generation.
