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11/11/2019 - Indian Economy

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November 10, 2019

Even though the start-ups have emerged as a successful initiative amidst a slowdown, the funding structure in this ecosystem is more fragile than popularly believed. Comment (200 Words)

Refer - Business Standard

Enrich the answer from other sources, if the question demands.

 

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IAS Parliament 5 years

KEY POINTS

·       Consider the “Indian Tech Start-up Ecosystem”, the latest report from the National Association of Software and Services Companies (Nasscom).

·       It is heartening to know that India has the potential to create more than 100 unicorns (a start-up parlance to describe companies with a valuation of $1 billion and above) in the next five years.

·       The report, “Fintech and Startups Fuelling India’s $5-trillion Economy”, highlights the role of start-ups in giving a growth impetus to the broader economy.

·       It noted that despite the overall slowdown, there was no dearth of funding in the start-up economy.

Funding pattern

·       It also brought out the difference in funding between traditional businesses and start-ups.

·       Traditional businesses relied on banks for funding their capex, and that the growth plans are stuck with liquidity drying up.

·       In contrast, capital (mainly by venture capital and highly valued tech firms) has continued to flow into the start-up world.

·       Growth without profitability may not be a sustainable model in the long run, as the start-up universe has witnessed time and again.

·       International investors backing start-ups typically target high valuations of the businesses they fund, so that they can exit profitably.

·       That, in turn, is made possible by offering deep discounts, whether on a shopping site or a food-delivery platform. This explains high growth among start-ups with little focus on profitability.

·       Indian start-ups run the risk of killing the spirit of entrepreneurship, while giving in to the valuation game of investors.

·       Many Indian start-ups have fallen by the wayside, and a large number of founders have had to step down because of a business model targeting notional numbers rather than profitability.

·       It is important for the survival of the ecosystem that more and more start-ups become profitable. This will also help attract more investment and make the start-up ecosystem a real driver of economic growth.

 

Shantanu tiwari 5 years

P

IAS Parliament 5 years

Good attempt. Initiatives is not needed. Keep Writing.

Shivangi 5 years

Please review.

IAS Parliament 5 years

Try to write demerits as a separate sub-heading. Keep Writing.

DHARU 5 years

Kindly review!!

IAS Parliament 5 years

Try to cut short the introduction part and focus more on funding pattern. Keep Writing.

Pocomaster 5 years

Review ASAP! Thank You!

IAS Parliament 5 years

Good attempt. Keep Writing.

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