The problem of “marketing spend” with Indian Tech Startups

The problem of “marketing spend” with Indian Tech Startups

I have a question which I am trying to get answers for from multiple people, but I am not sure I have the answer yet.

The average US technology startup raises a seed round of about $150K which lasts them 12-18 months. Most Indian startups look to raise a seed round of $250K which lasts them 12 months or less. Why is that?

Let me give you more clarity on both numbers.

The average YC company gets $25K from YC and a no cap convertible for another $125K. Most (>39% in the latest batch apparently) raise money before 18 months of graduating from YC, but many still have the money last 18 months. The average company has 2-3 people in 12-18 months until they have product-market-fit in the US.

The average Indian company gets by further along by bootstrapping and is not much further along (in terms of product-market fit) than the US counterpart. They raise $200K (1 CR) and that money they claim will last them 12 months. The average Indian product startup has 6-10 people in 12 months.

The money that’s spent is primarily on acquiring customers and payroll.

Even though we have more people in the Indian product startup, we have more-or-less the same payroll costs.

But most startup plans (business plan or execution plan) I see keep aside 40% of their raised capital for “marketing” costs. For customer acquisition – SEO, events, or “viral campaigns”, etc.

So here’s my hypothesis:

1. We need more money because paying customers are *much* harder to get in India than US. Most US startups spend ZERO in marketing (out of pocket costs) for the first 18-36 months from my personal experience.

2. We need more people because most of our startup founders are “generalists” not “specialist and generalists” who cant really code or run a digital marketing campaign or close a sale. They have to “hire” a CTO, CMO and Sales head to do that.

3. We need more money because cost of doing business in India is a lot more than US.

I dont know the answers, but I am very curious what entrepreneurs in India think is the reason product startups need almost twice as much money which lasts 2/3 as less than US counterparts.

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.

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