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India rises as start-up nation

dpadpa 11/07/2016 Siddhartha Kumar

Resourceful and willing to take risks, young entrepreneurs are transforming the way business is done in India.

In a suburban Delhi neighbourhood where boys play cricket in dusty parks, a group of young professionals in a food tech start-up are busy working late into the evening to organise an event.

From a rented home, the team in their 20s run Food Talk India, which started off as an online community for food lovers and turned into a focused marketing platform for food and lifestyle brands.

"It's pretty much a business created from thin air. Brands started noticing us and we started curating unique food experiences like Dinner with Stranger and Blind Tasting that got a fantastic response," said Shuchir Suri, 27, who quit his marketing job to set up Food Talk in 2013.

"Our company is evolving from a food community, generating business by leveraging technology and data science. We learnt about our business hands-on," co-founder Anjali Batra said.

Food Talk claims to be India's largest digital food community with 400,000 followers across social media. It raised $US500,000 ($A671,546) in funding and is expanding to cities outside Delhi.

India has emerged as the third largest start-up hub in the world after the United States and Britain, with more than 4,200 firms, according to a report by the National Association of Software and Services Companies (NASSCOM).

Some $US6.5 billion was invested in start-ups in 2015, up from $US2.2 billion the previous year. As start-up competitions are held in cities, engineering graduates are becoming millionaires, with venture capital funds chasing their ideas.

"This is a new transformation of India with start-ups driving the change. Every traditional business as it has existed is going to get disrupted," said Ravi Gururaj, head of the NASSCOM product council.

"Many of India's opportunities and problems will be addressed not by large companies but young, nimble start-ups. This is where the new jobs and new economy will be created," he said.

Most young businesses are focused on e-commerce or mobile payments.

But entrepreneurs are also showing interest in solving problems in health, clean technologies, agriculture, logistics and education that have plagued the country for decades.

Examples include Inderpreet Wadhwa, founder of Azure Power, who left a comfortable US career to become an early mover in India's solar energy sector, or Meena Ganesh who runs, home healthcare firm Portea with her husband.

India's IT success, technical and managerial pools, a fast-growing economy and a burgeoning domestic market gives it an edge, Gururaj said.

Traditionally risk-averse and known for their preference for stable jobs, Indians are now taking chances, Arvind Singhal chairman of management consultancy Technopak, said. First-generation entrepreneurs are following the risk-embracing culture of Silicon Valley.

Among the start-up mascots is 22-year old Ritesh Aggarwal, a college dropout who founded OYO Rooms, an online marketplace for affordable rentals, which has 40,000 rooms in 150 cities on offer and is expanding to South-East Asia.

Vijay Shekhar Sharma's mobile payment company Paytm received $US680 million in funding from Alibaba last year. He now sponsors the Indian cricket team and is regularly in the media spotlight.

But there are questions whether the boom is actually a bubble that could burst, amid signs that fledgling companies are overvalued and the market could be slowing.

Established names like real estate search site Housing and restaurant delivery start-ups TinyOwl and Foodpanda earlier this year laid off hundreds of employees.

"There might be a bubble in valuation, but there is real need and demand. They are doing real business.

"Investors do lose money and there will be failures - it happens everywhere in the world," said Saurabh Srivastava, chairman of the start-up incubator, Indian Angel Network.

It is estimated that between 70 and 90 per cent start-ups fail in the West. Only 10 per cent of the network's portfolio companies have failed, Srivastava said.

NASSCOM projects the number of start-ups will grow to 12,000 by 2020.

Pankaj Karna from Maple Capital Advisors argued that the start-up ecosystem is at an "inflection point," saying India is among the world's most-connected populations. It has 350 million internet users and more than 900 million mobile subscribers.

"Connectivity is disrupting traditional models of business and creating numerous opportunities," he said.

E-tailers like Flipkart and taxi aggregator Ola are now household names worth billions of dollars.

India may well become the world's start-up capital but much depends on the government's "Start-Up India, Stand-Up India" plan.

Main hurdles include regulations involving early-stage financing, transactions and taxation.

More than 70 per cent of the new tech start-up firms could move out of India because they are finding it difficult to raise seed or venture capital, structure their organisations or sell them, the Economic Times reported.

Entrepreneurs are expecting the government to remove impediments and give support via incentives.

Already, major initiatives including those by NASSCOM to enable 10,000 start-ups and large state-level incubators have been launched.

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