Six people are having a discussion on this topic (Avinash, Hari, Prakash, Kumar, Balaguru, Hasa)
Avinash: Hello everyone, today we have one of the most talked about topic of last few years. That is start up. We have to discuss whether it is a fad or a trend that is going to stay. I think that with the advent of technology all around us and youngster’s wish to do something on their own is a clear indication for a changing trend.
Hari : I totally agree with you. The increasing amount of FDI in country and increasing response to the innovative ideas is definitely working on the root of the big tree of the future. At a time, Infosys, Apple, Microsoft were also mere start-ups but now they are the leading players of their markets.
Prakash: But we should not forget that the success rate of a start-up is not quite high. It also discourage the youth and also the investors who will become more and more averse to put their money in any start-up if such a path will continue.
Kumar: Another thing is that most of the start-up now-a-days are internet based application and websites. It is limiting the innovation in other field and people are not considering the other areas. The saturation point can be around the corner and that is troublesome.
Balaguru: But we should not forget that the saturation is not visible yet and the reachability of internet has made it what it is today. The penetration is still increasing and various demographics have their own demand so the saturation point of web based product and service is a farfetched thought.
Hasa: I also think that start-up trend is going to stay. The government has already started working in the direction. The removal of capital gain tax is one such step by the government and everybody is realizing that to generate more and more jobs we need this trend.
Kumar: No doubt that we need start-ups in our country as they generate a lot of jobs and hence create a whole new cycle in the economy. But the question is that the current condition when people are focusing on internet based start-ups, the trend is going to last? Shouldn’t the focus need to divert to other sectors also?
Avinash: Well, it’s not the case actually. People are trying in different sectors but the growth chance in this sector with minimum investment is what is making it a lucrative field. And it is easily noticeable and hence media is talking more and more about this start-ups and not the other one.
Balaguru: WE have seen start-ups from financial services to logistics. It is everywhere. But the thing is that we need investment and if the youth will get proper investment, they will look at all the sectors and people who are pursuing their education in field of computers are the ones who are focusing on this sector. Hence the others will take care of their fields.
Prakash: We should look at the key factors that are necessary for the success of a venture. First thing is the demand of the product or service that is being offered. So, as we are dependent on foreign players for a lot of services. It makes sense to launch something of our own. The second important thing is that it frees the youngsters from any kind of burden to follow a job routine.
Hasa: There is one con side of the same benefit. As we have always heard and seen that people seek no authority mainly follow this path of career. If they join some job to make money initially, there are fair chances that they won’t be able to give their hundred percentage and the productivity will go down.
Avinash: I differ on this one. It should not be the case as the pay are usually based on the performance of the candidate and this make the person more conscious about the work he is doing. HE will try to give his best to make good money and gain good reputation as it can help him to find venture capitalist for his start-ups.
Balaguru: the government is also showing positive response to the start-up culture which will be a good indication and moral boost for the people who are seeking career with this option. It will help them to grow in the conservative society where people are mainly focused on jobs as career.
Prakash: A good point, Balaguru. One main challenge that the trend can face is the society restriction. It is often seen that parents usually try to talk their children to follow the safe path of jobs to grow in career. Most parents are still risk averse and they focus on the negative side of the entrepreneurship.
Kumar: The low success rate will also be a big fear for them but the success stories will definitely give them hope. It will take time but they will understand. I think, it’s less of our concern than the investment problem. For how long, we can expect investments in these ventures.
Hasa: Right now, India is growing at a good rate and hence we can expect that the investment will flow in till we are growing. As we have seen that the Chinese devaluation of Yuan actually affected the investors and a lot of them left the Indian share market so we can conclude that the FDI and FII will always be dependent on the external factors which the entrepreneurs cannot control.
The start-up is a trend that is going to last. A lot need to be done but it will grow with time and help the economy to grow. Investment, social restrictions and others can be problem for the growth trajectory but the numerous success stories, reforms in economy and increasing need of people will lead the show and help the innovators to come up with new idea by supporting them in their experiments with ideas.
• India has the third highest number of start-ups in the world
• 25-30% of valuation of start-ups is actual cash funding
• Big players in the market like Flipkart/Snapdeal, PayTM, and InMobi have generated an EBITDA margin of 6%, 22%, and 33% respectively in CY2014.
• The valuation/net sales ratio of big ecommerce players like flipkart, amazon and Jabong are in the range of 9-11
This article has been researched & authored by the Content & Research Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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