A query on Status Quo

By Karthik Adithya on November 19, 2015 4 Comments / 3610 views

Hi Everyone,

I am writing this to post a question which has been on my mind for a while.

These days everybody is going Tech.

Many publicly discussed entrepreneurial journies start around Tech, and end with Tech.

But why aren’t there many stories coming out about Non-Technical StartUps?

StartUps in sectors like – Textiles (who actually make textile, not design&deliver them), or food startups (which actually make food), or hobby startups (which aren’t an app)?

Why is Indian StartUp Scene predominated by Technology based startups so much?

Why is VC and Angel Investor level people invested only in Tech StartUps? Why are most of our ATL & BTL ads/promotions heavily about apps?

In the end, do we really spend so much of our time on such apps, services, etc. that it is over-and-above most of the other sectors of StartUps?

Also, an ironical observation from my exposure to StartUps has been that many Technology driven StartUps are funding driven, not profit driven.

In fact, as many Financial Reports elucidate, they are in fact in losses, and just burning cash funded through repeated rounds of investment.

On the contrary, most of the StartUps in traditional fields actually are profitable, and make good business. Isn’t that the core tenet of doing business – Make profit?

Isn’t it blasphemous (for the want of emphasis) to even have a conversation on StartUp Ecosystem of a Country without factoring in the Non-Technical, or the Profitable, or the High Employment-generating sectors?

Would love to know your views on this.

Thanks, Karthik

My Twitter handle is @SpectrumLess

Comments

Karthik Adithya

4 Comments

Bala Satish G November 23, 2015, 3:01 pm
The whole preview of the answer is that Entrepreneurs build disruptive businesses. A hobby or a small profit org can always be done, it depends on the business man/ artisan.

Here are some thoughts on the why
1. Technology companies have less operating costs ( mostly salaries for engineers and sales staff, server bills)
2. They can be replicate business value in a click/login which makes them highly scalable.
3. Venture money is best suited for this kind of scalable businesses that can give 10X to1000X returns
4. On the contrary tangible products like textile/food products need high R&D investments. Much has already been tried out. The cost to prototype itself is huge.
5. Even though you end up making the tangible product, the pricing of the product will be high unless it is produced bulk in assembly.You end up not having paying customers
6. Distribution channels/ Sales channels are limited to reach profitability, You will end up again relying on Market places and online marketing spend which will eat in to your profit line.
7. Personal capital is not sufficient for go to market. Venture capital is not there for this kind of projects. Debt capital is only available but you need a patentable product and the one that could sell.
It is not that it is not possible. The challenge is at a very different level. Provided there is such kind of IP in the product it can definitely reap billions like the semiconductor companies are doing now 🙂

Current emerging markets have a lot of unused assets, internet is helping us disrupt all these unused assets. Uber, Airbnb are solid examples for these. We will slowly move in to high IP zones once the low hanging opportunities are exhausted.
Sajid Khetani November 23, 2015, 3:12 pm

Interesting read Karthik. I agree with you that there is lot of buzz surrounding everything and anything to do with technology. But, let’s not forget that technology has played a major role in disrupting the traditional way of doing things and focused on providing convenience to the end users. At the same time it has opened up avenues for businesses to reach out to a broader customer base.

Take for example our local kirana stores or a lady baking cakes as a hobby or someone who is an excellent chef. All of these have got an opportunity to reach out to customers which were beyond their reach – all because of Technology.

Another thing to note here is that all the industries go thru a cycle. Right now in India, there is mad rush to replicate what has been successful in the US. Many of the investors have lost an opportunity to participate in the growth stories of the famed startups of the West. They want to make good of the lost opportunity by investing in their Indian counterparts and ride the wave this time.
Karthik Adithya November 24, 2015, 3:46 am

Thanks a lot for sharing your views satish and sajid.

So to summarise, key reasons for this trend are –
1) low cost operability

2) innovation in service

3) not to lose out on opportunities on VCs part.

Fair enough.

But one doubt still persists –

A startup ecosystem should also promote businesses that as value to the economy right? Because whatever innovation might be achieved in racing out to the customer, still traditionalists serve the vote need of the customer – products.

So while I don’t intend to imply that attention from tech industry should be withdrawn, isn’t there an untested scope with almost guaranteed returns in the non-technical sectors?

I mean also, by focusing only tech sector, aren’t we encouraging investor driven models, rather than profit driven. Exit strategies are formulated before business operations begin and there are 40 apps doing the same thing while it is obvious that market eventually tends to consolidate around the top 3-4…

Why can’t the entrepreneurial folks think about tapping the traditional sectors.

I mean initial investments in traditional sectors are way lower than the investments VCs put in tech industry. Not to mention, profit is assured, provided enough effort is undertaken.

Also isn’t it crucial to develop skills that will run actual economy, and not just develop ones which make it “efficient”?
Alok Rodinhood Kejriwal November 25, 2015, 9:11 am

Startups attract VCs who like ‘bizarre’ returns

Using tech, you can build an Uber that becomes ‘bizarrely’ valuable

Using Brick and Mortar you cant (It took decades to build McD, Disney)

So, its the ASPIRATION of MONEY that funds what it thinks will give it back 100X return – that aspiration is POWERED by Tech