Growth Challenges of High-Tech Startups WORKSHOP ON GROWTH ISSUES FOR STARTUPS IN INDIA 9 TH DECEMBER 2015, ASCI, HYDERABAD Presented by: Jignasu Yagnik Entrepreneurship Development Institute of India Ahmedabad Based on Research Study Sponsored by Department of Science and Technology “Problems and Issues Faced by Hi-tech Entrepreneurs in Launching, Managing and Growth of their Ventures” Dinesh Awasthi, Archana Dholakia, Bipin Shah and Jignasu Yagnik

Background The findings are based on responses of 48 Entrepreneurs running New Hi-tech Firms (<48 months), spread across 10 states. Data were collected during November 2014 –Feb-2015 Industry sectors covered ICT (48%), Food (19%), Engineering (13%), Healthcare (8%) and others (Plastic, Research, Chemicals etc.) 12% Distribution of Units by Initial investment ◦ Less than 25 lakhs (73%) ◦ lakh (10%) ◦ > 50 lakh(17%)

Operational Issues Affecting Production Operational Challenges Hamper Stabilization, a stage precursor to Growth phase The key operational challenges bothering Hi-tech Firms are Challenges% Issues Related to Skilled Manpower 29% Space/Infrastructure constraints 15% Getting Payment on Time 13% Regulatory Issues 8% Others (Marketing, Raw Material etc.) 18% No Problem33 % (%ages may not add to 100 due to multiple responses)

Marketing Problems Three Major Problems related to marketing faced by these HTFs are Problems% High Cost of Entering New Market66% Regulatory Requirements29% Domination of Established Player29% (%ages may not add to 100 due to multiple responses) 30 Respondents

Problems Faced by HTFs in Exporting their Products Almost one-third of these enterprises were involved in exports The key problems faced by exporting firms are Problems% Logistic issues45% Marketing and Branding22% Government Procedures11% Rules and Regulations in different Countries 11% No Problem11%

Top 3 Growth Challenges Addressed by HTFs in the Recent Past Challenges% Product Innovation73% Cost Containment49% Making Customers Happy45% 37 Respondents (41 more than 2 yrs.) (%ages may not add to 100 due to multiple responses)

Challenges in Executing Immediate Growth Plans Two-third of these young enterprises have immediate growth plans Their immediate growth challenges are Challenges% Inability of Venture Capitalists/ Banks in evaluating worth of our products 57% Lack of Skilled Workforce /Talent Acquisition43% Regulatory Issues20% Infrastructure/ Facility constraints14% R & D limitations14% Others (Quality, Sustainability etc.)10% (%ages may not add to 100 due to multiple responses) 37 Respondents

Top 3 Growth Challenges in Next 2-3 Years Challenges% Obtaining Finance53% Product Innovation53% Improve Supply Chain Management43% Improve Margins40% 39 Respondents (%ages may not add to 100 due to multiple responses)

Major Growth Constraints of Startups According to Domain Experts Constraints% Lack of Funding92% Managerial Deficits of Entrepreneurs not compensated by hiring professionals 56% Talent Acquisition and retention48% 25 Experts

Top 3 Recommendations for Large-Scale Emergence of Startups Recommendations% Relaxation in Rules for Funding Startups38% Govt./Banks Should Revise their appraisal criteria – Accept Knowledge as Asset 35% Better Industry-Academia Linkages to address problems faced by firms 31% 42 Entrepreneurs