Over 90 percent of Indian startups fail within the first five years. No surprise there as that is the global average as well. The surprise lies in the most common reason for failure of startups in India: lack of innovation, according to an IBM (NYSE: IBM) study.
“Many Indian startups lack pioneering innovation based on new technologies or unique business models. Indian startups are prone to emulate already successful global ideas,” global ideas,” say 77 percent of venture capitalists surveyed under the study.
IBM’s Institute for Business Value (IBV) recently collaborated with Oxford Economics to understand India’s startup ecosystem. They interviewed 600 startup entrepreneurs, 100 venture capitalists, 100 government leaders, 500 leaders of established companies, and 22 educational institution leaders to understand the impact of startups on the economic growth of the country.
Here are its key findings:
- Over 90 percent of Indian startups fail within the first five years.
- 77 percent of startups fail because of lack of innovation.
- The top business advantages enjoyed by Indian startups are the country’s economic openness, skilled workforce, and its large domestic market.
- Around 35 percent of startups are being set up in tier two and tier three cities of India.
- A proposed reduction in corporate tax from 30 percent to 25 percent is likely to boost startup activity.
“We believe that startups need to focus on societal problems like healthcare, sanitation, education, transportation, alternate energy management, and others, which would help deal with the issues that India and the world face. These require investments in deep technology and products which are built to scale globally,” Nipun Mehrotra, chief digital officer, IBM India/South Asia said in a statement today.
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