Which is the most innovative Indian startup

Startups in India: The Second “Jugaad” Revolution

Bangalore / Mumbai Although the negotiations on the trade agreement between India and Europe are stalling, the partners are getting closer. Praveen Paranjothi provided the proof last week. The venture capital investor traveled with a delegation of around 20 through India's tech metropolises Delhi and Bangalore to explore the country's start-up scene. Embassy representatives from Slovakia, Luxembourg and France met Indian start-ups and corporations such as SAP, Cisco and Rocket Internet at the final conference. “Europe's growth is stagnating. India, on the other hand, is a huge, diverse market and offers plenty of growth opportunities, ”said Paranjothi.

He sees himself as an intermediary in the exchange between the digital markets of both regions. Born in India, he has lived in Europe for many years and founded the “Start-up Europe India Network” (SEIS) initiative in January, a private sector network with the support of the European Commission. The goal: combine strengths, find synergies.

The timing seems just right, because India's entrepreneurial spirit is expanding. In 2015 alone, the number of start-ups grew by 40 percent, and investments reached an all-time high of around 7.3 billion dollars. According to a recent report by the Indian software association Nasscom, India ranks third worldwide with more than 4,750 tech start-ups - behind the USA and Great Britain.

The advantages are obvious: With around 1.3 billion people, the country not only has a large number of skilled workers, but also a huge market of potential consumers. Lengthy bureaucracy processes, corruption and inadequate infrastructure have so far prevented India from drawing too much from its locational advantages. As part of the Make in India campaign, the government under Prime Minister Narendra Modi therefore launched a series of measures to make India more attractive to foreign companies.

This also includes the “Start-up India Action Plan” that Modi presented at the beginning of the year: a 19-point list that promises considerable support for start-ups, for example in the form of a start-up fund, tax rebates and relief in the area of ​​start-ups and financing. The Minister for Trade and Industry Nirmala Sitharaman announced energetically: "We are determined to start a start-up revolution."

A revolution would do the country good, especially in terms of employment. Around a million people enter the labor market here every month, but the number of additional jobs has been falling for years. The big employers of the future, it is hoped, will not only be established corporations, but also the young founders of tomorrow. But the innovative power of Indian companies is still underestimated internationally, said Paranjothi.

If one believes the founding duo Varun Kashyat and Sumit Nagpal, India can partly attribute this to itself.

"Your idea must first be accepted in the USA or Europe"

With their “BilleZ” app launched in July, the two engineers want to introduce an electronic feedback and payment system for shops that works within a few minutes and without the hassle of changing the system. But their hopes for the Indian market are cautious. According to the founding duo, India is still too much oriented towards the West. "To be successful here, your idea must first be accepted in the USA or Europe."

Whether the e-commerce platforms Flikpkart or Snapdeal, the taxi service Ola or the payment service Pytm - the most successful startups of the past ten years were primarily Indian replicas of international models - copies of Amazon, Uber or PayPal. Now that the basic needs of the consumer market have been served, it is now time to develop your own ideas, say Kasyhat and Nagpal. “Investments here still have to be risk-free. Even the competition of already successful start-ups is more likely to get capital than completely new innovations. "

The consumer market in particular is highly competitive: a good two thirds of tech start-ups serve end customers. With more than 460 million Internet users, the Indian population is a land of milk and honey for digital entrepreneurs who are hungry for sales. The Indian software association Nasscom expects 730 million by 2020. More than 80 percent of users already go online via mobile devices, and the number is currently doubling almost every year. India, many say, is skipping the industrial revolution to dive straight into the digital one.

But India has many faces and one thing looks like this: 70 percent of the Indian population lives in rural areas, just nine percent here have access to the Internet. Politicians and the private sector are trying to change that. To this end, the government started a large-scale “Digital India” campaign, and corporations such as Reliance and Google are also investing heavily in the country's digital revolution. And even then, a farmer has not yet become a lucrative customer. The average per capita income of an Indian is on average still far below that of a person in Europe. Most recently it was around $ 1,700. Nobody in the country can afford to order clothes online.

Reality caught up with the bloated e-commerce industry at the end of last year. A series of food delivery services or online stores closed locations and laid off staff. As quickly as the crowds of customers grew, the millions in capital quickly vanished.

“Although consumer-oriented services offer the greatest market potential, they are also particularly difficult to monetize,” says Francisco Velázquez, founder of the Spanish Axon Partner Group, an investment company with a focus on emerging markets. The German start-up company Rocket Internet misjudged itself: its fashion platform Jabong, for example, posted high losses until it was sold in July, and the food delivery service Foodpanda had to lay off 300 employees at one stroke.

In view of the declining growth in China, the investment situation corrected sharply downwards. While it was $ 7.3 billion in 2015, according to the analysis portal Your Story Research, only $ 3.5 billion in venture capital flowed into Indian start-ups this year.

"Local clones with minimal innovation"

Many see it as a maturation process that reminds the industry of its own potential. After all, it was less than five years ago that entrepreneurs and economists around the world brought about the “Jugaad” revolution. The Indian term describes the special problem-solving skills of Indian people, whose everyday problems educate them to simple but novel ingenuity. As “frugal innovations”, ideas from emerging countries like India should first revolutionize local and then international markets.

But the big throws did not materialize. “There are successful new products in emerging markets. Often, however, these are actually global models or local clones with minimal innovation, ”says Alok Bardiya, head of the investment arm of the telecommunications company Cisco. He sees the future of the “Jugaad” revolution in B2B markets such as the health sector, IT services or artificial intelligence - wherever technology promises to solve India's pressing problems. The number of start-ups in these areas has risen sharply, especially in the last year. In order to develop the power of “Jugaad”, however, it has to become “systematic innovation”, according to Bardiya.

Some founders have recognized this and are openly looking for foreign mentors who not only provide them with capital, but also provide them with advice. A study by the Bertelsmann Stiftung in September only indicated how fruitful the combination of Indian crisis management and German long-term planning would be.

The start-up Gray Orange serves as a good example. The warehouse robot manufacturer is five years old and currently controls 90 percent of the Indian warehouse automation market.

The company was founded by the two Indian engineers Samay Kohli and Akash Gupta, as well as the German Wolfgang Höltgen. In 2007 Kohli and Gupta invented India's first humanoid robot, the "AYCut". But it was only Höltgen that gave her the idea of ​​developing technology for the growing logistics market. The director of the German Indian Business Center in Hanover draws on a lot of experience in the software industry and is not only an investor and co-founder for both of them, but also a mentor.

"Höltgen's experience saved us a lot of time, especially in the implementation of company processes," says Kohli. Last year alone, the company grew by 300 percent and today employs around 550 people in six countries - 35 percent of them in research and development. The company is also planning to set up a research center in Germany. So far, 70 percent of the suppliers have come from there. Despite Modi's “Make-in-India” campaign, the production of high-quality parts is hardly possible, especially for new companies in India. Everyone agrees that there is still a lot to be done here. With a little patience, however, the revolution might still come.

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