Indian e-commerce bigwigs Flipkart and Snapdeal ignited the dreams of many a wannabe entrepreneur in India. “If they can, why can’t we?” was the common euphoria among the young lot, gearing to go places, riding on their ingenious dream! But that was just the bright side of the coin. What the untrained lot didn’t know was that the other side was rusted beyond repair.
Armed with a few self-help books and a burning desire to be the next Mark Zuckerberg, they invest all their life’s savings in a start-up and within half year, the project goes kaput. There’s not one reason to blame for this fiasco. Quite often, it’s the lack of ground-level knowledge, no practical lessons at managing money and most importantly, lack of funds that brings down the start-ups.
Reuters recently published an article which stated that according to a new report by CB Insights and KPMG, venture capital investments in India’s start-ups nearly halved to $1.5 billion in fourth-quarter 2015 from July-September.
Prime Minister Narendra Modi’s start-up initiative has promised to offer $1.5 billion to help young entrepreneurs. But they fear this might not be enough, in fact very too little to help those hundreds of people waiting for help from the government. China’s economic slump has already created a ripple in the global market and this has attributed to venture capitalists tightening their purse strings already.
The Start-up initiative plans to include tax breaks on their first three years of profits, as well as their investors. But this is just a wishful thinking, considering the fact that most tech start-ups make losses. Even top e-sellers Flipkart and Snapdeal are no exception. In the process of increasing sales through deep discounts, they end up incurring huge losses. And for small newbies who manage to make a little profit, they end up by doing mergers with well-known brands, where they lose the name.
The e-commerce site BabyOye started faltering and was acquired by Mahindra group who runs the Mom & Me brand of stores that sells clothes and accessories for new mommies and their babies. But even the merger hasn’t been able to change the dynamics of the group. The site has limited stuff, mainly the Mom & Me merchandise, and the discounts are not too great either. The rival site Firstcry however, has been doing well, if not great. They still offer hundreds of different brands from India and abroad, and keeps offering flash sales. To stay afloat, you need to know the market well and have the backing of generous funds.
Let’s hope PM Modi’s Action Plan will work out well when it’s rolled out soon.