Dauntless! That is what defines the Indian high-tech startup ecosystem, which continued to grow through a pandemic and propelled the electronics industry to aspire for a new goal—a $300 billion industry by FY26. Realising this ambitious goal is no mean feat as the very drivers of this goal continue to struggle to emerge out of the struggling startup stage and become an established business. Yashasvini Razdan from Electronics For You writes on how high-tech startups can steer through the challenges that come their way.
Eight years ago, on August 15, 2015, the Prime Minister of India announced a new initiative called the Startup India Campaign to catalyse startup culture and build a strong and inclusive ecosystem for innovation and entrepreneurship in India.
In the past eight years, India has grown to become the third largest ecosystem for startups after the US and China. In December 2022, the Department for Promotion of Industry and Internal Trade (DPIIT) declared that the number of startups in India has grown from 452 in 2016 to 84,012 in 2022 of which 23,773 came into being in 2022 itself.
Despite the glorious numbers, 90% of the startups fail, of which 10% fail in the first year and 70% fail between the second and third years. Many would attribute this to a lack of funding, unclear vision, and inadequate resources. Whitewashing the failure of startups using these three reasons isn’t going to help. To reduce the percentage of failure one needs to dive deeper into the reasons why startups fail, especially in the high-tech sector.
Traversing through ‘the road not taken’
Bengaluru is the hub for startups and traffic, of course! Right from choosing the correct transportation to factoring in the time taken to book a ride, pre-planning one’s journey before heading out is a must. Building a startup is akin to planning a journey via ‘the road not taken’ and entrepreneurs need to follow the same step while finalising their destination.
The first rule to planning the startup journey is very obvious—a business plan! Far too many startup founders think a pitch deck is a business plan, which is a very wrong notion. A business plan is a live document, which is constantly revised and not something with a pretty ring binder only to be forgotten about later.
Trudging alone, on the road not taken, is a daunting task but a partner can surely make the journey easier. For startup entrepreneurs, choosing the right co-founder is like selecting the right life partner. Co-founders with complementary skills and those who mutually agree on the business plan can make it easier to navigate through the whirlwind of challenges encountered by a startup.
The co-founders need to be clear on the goals they aim to serve. Do they wish to be a product startup or a services startup, or do they want to sail on both the boats? Product development just for the sake of innovation does not warrant the sustenance and growth of a startup.
To be successful, startups need to converse, interact, and talk to at least 50-100 customers in a particular segment to identify their needs and build a product that serves those needs and eventually sells. Asking the right questions that get a customer to open up about their requirements, allows entrepreneurs to formulate and obtain more clarity on how their product should get developed. These customers can later be approached again, once the prototype is ready, to check whether it meets their needs.
By this time, the ringing question that would come to an entrepreneur would be, ‘How does one collate all that information to understand and utilise it?’ Big manufacturers go to market research firms but startups lack the capital to afford that kind of luxury. So, they can make use of open source tools, such as a Google Dashboard, which is free. Crunching numbers, simulating data, creating a demo—it offers all.
The government has announced multiple grants, such as the NIDHI (National Initiative for Developing and Harnessing Innovations) Prayas, aimed at providing prototype funding to convert an idea into a prototype of a product that has the potential for commercialisation for aspiring innovators.
While finalising the destination and route, entrepreneurs need to gauge the time it would take for their startup to achieve its goals. Factoring lead times and the cost of raw materials is an indispensable part of this planning stage. Covid-19 and the semiconductor supply crunch have shown us that entrepreneurs need to be prepared for all supply-chain issues they may face.
Tackling the bull
Product development is a long-drawn process. After crossing multiple barriers, when a startup finally reaches the product development stage, life doesn’t become any easier than it had been earlier. Decisions regarding finances and product design can make or break the life of the startup.
Manoeuvring through this battlefield of challenges cannot be done without the guidance of an experienced professional. Having a mentor or a trusted network of individuals to talk to and discuss specific needs can be of great assistance.
If the startup connects with a startup incubator, guidance pertaining to development and business strategy will be readily provided to them. Various Centres of Excellences (CoEs) under the Software Technology Parks of India (STPI) have been set up in different cities of India to assist hardware manufacturers working on disruptive technologies in the electronics industry.
Every startup needs funds and support to come up with a prototype for its customers. Connecting with the correct investors and incubators is similar to finding an escalator to reach the next level of growth.
When looking for investment through private equity investors, startup founders should choose the correct investors who understand the perils of developing a hardware technology product startup. Seeking funding from ‘real estate investors’ who want 100% returns within a year is the same as drinking soup using a fork! The chef (investor) will keep on wondering why the soup (product) isn’t finished.
The government has announced multiple grants, such as the NIDHI (National Initiative for Developing and Harnessing Innovations) Prayas, aimed at providing prototype funding to convert an idea into a prototype of a product that has the potential for commercialisation for aspiring innovators.
Consortium of Electronics Industries of Karnataka (CLIK) President, Madhav R. Badsheshi, told EFY, “Schemes such as Nidhi Prayas provide a grant of `10 lakh (one million rupees) to startup companies or entrepreneurs. In the beginning, for making the initial prototype, this amount suffices but as you go up the ladder, you’ll need more funds. You’ll need a lot of money for a market survey alone! You’d need to study the market, and after getting the inputs, you’ll have to adjust your business plan.”
To reap maximum benefits from investors, entrepreneurs need to have a clear understanding and focus on what product they are going to build. Most of the work is already done if the innovator has a fine business plan. Along with that, the entrepreneur needs to highlight the innovation and explain what other options are already available in the market.
Investors need to know the reason they should invest in a particular startup. With a detailed but very articulate business plan, startup founders can convince the investors to invest in their startup even before they come up with a minimum viable product (MVP).
Moving on from the ideation to an actual proof-of-concept (PoC) phase is the next challenge in the life of a startup. To come up with an MVP, the startup needs to go back to those customers they spoke to during the ideation phase.
“You need to have a set of specific questions for your customers and constantly refine your idea to make it useful. Don’t try to boil the ocean at this stage and add up all of the features into one product. That will take another year,” cautions Bharat Innovation Fund partner Somshubhro Pal Choudhury.
Choudhury’s warning is further supported by Maker Village CEO, Nizamuddin Mohammed, who articulates the need for rapid prototyping. He says, “With every hardware product, you need rapid prototyping. We call it the fail-fast technique. You need to come up with a product fast, test it out with the customer in your target segment, and then iterate on it.”
Once customer interest is generated and the MVP is ready, startups need to start minting money. The sustainability of a startup depends entirely on how much money it has in its coffers and how it gets the cash flowing. Taking eyes off the cash flow at any time means a sure death for the startup.
Choudhury explains how startup founders can do pricing discovery at this stage. He advises startups to engage in a repeatable kind of business that ensures recurring revenue, which would get the investors excited. “When you do a pilot PoC with the customer, do not go for a free PoC. At least get some money out of the customer. This way their willingness to pay gets tested,” he says.
Choudhury also underlines the importance of the founders doing the first few sales, instead of sending in a sales representative, to get the actual feedback from the customers.
Trudging through the last mile
A few years ago, a telecom infrastructure company in Chennai deployed the equipment to be used in a beautiful cast iron casing. While the cast was designed to perfection, the company made one mistake. They forgot to put powder coating on the cast iron casing. Within a year of deployment, the telecom provider asked them to change the equipment as it had rusted and didn’t work anymore.
Renowned electronics industry advisor PVG Menon, who chaired the panel discussion at the IEW 2022, narrated the above story. It was to explain to the audience how the company had gone ahead with product development without understanding their deployment scenarios and support requirements.
More than often, companies develop their product in an industrial environment and forget to account for additional support requirements in a remote deployment scenario. Too many aspiring hardware startups struggle to distribute their talent and skill uniformly across all sectors of the business. Many times, the most efficient task force is deployed towards product development while the sales and marketing segments share the same fate as the middle-born in a conventional desi family—ignored and left to their own devices.
Electric vehicle startup Greendzine Technologies’ co-founder, Karthikeyan Sundaram, talks about his own experience and issues a cautionary warning for all entrepreneurs. “We assumed that since our engineering design and product are good, we could relax on the marketing front, but that was not correct. We had to learn marketing and sales, which was the biggest learning struggle we had to go through for a long time. If I had to establish a startup again, then I would focus more on marketing, sales, branding, as well as engineering, and not the other way around,” he told EFY.
Internet of Things startup Refillbot’s director, Prabhu Stavarmath, elaborates on brand-building and scaling up on marketing. “Brand building is very important once you have a product, so that your prospective customers can discover you, through Google, LinkedIn, or even the newspaper. For some, it happens organically as well, but it’s always good to have some basic marketing in place and a brand built in the early stage. From thereon, you just need to scale up,” he opines.
Adding to that, co-founder and director of the startup Silizium Circuits, Rijin John, shares with EFY his experience with customer interaction and the role it plays in helping the startup design its intellectual property (IP). “Our IP roadmap was purely based on our potential customers with whom we had already spoken and who were interested in our product. We wanted our product to be at par or better than the imports of IPs. We successfully taped out our first semiconductor IP in September 2022.”
The year is 2023. Gone are the days when the term startup would just imply a new application software. India is witnessing a sweeping growth of startups in the high-technology sector. Despite the plethora of opportunities available, innovators in this arena are facing a lot of challenges ranging from finance to human resources and from launch to sustaining growth with tenacity.
It is important to ensure and aid the success of these high-tech startups as they hold the potential of creating jobs in the manufacturing sector and realising India’s dream of achieving a $300 billion electronics industry. With appropriate support, synchronisation, and mentoring from stakeholders, the government, and the electronics industry, startup innovators can easily manoeuvre their way to success.
