“Innovations make peace, not enemies.” — Anonymous
In the Indian startup ecosystem, the reverse stands true. More often than not, startups have vilified by corporates for innovating. However, it has been good going for the ecosystem — startups are solving unique and emerging problems, attracting investments and M&A, and scaling and expanding.
Unfazed by competition from large companies and banking on the lucrative, big, smartphone and internet-enabled population of India, startups continue to innovate at a breakneck speed.
Every action has an equal and opposite reaction. In a bid to keep up with agile startups, big companies too are staying on their toes — innovating and investing in R&D to grow.
The startup-corporate connection has been a difficult one to forge, but one that’s as important as any other in the ecosystem.
With a view to understanding the current synergies in this rocky relationship, Inc42’s The Ecosystem Summit, held in New Delhi on November 16, brought together some executives of top companies for a panel discussion entitled ‘The Corporate-Startup Connect’. Digbijoy Shukla of Amazon Web Services (AWS) and Gaurav Kanwal, Adobe South Asia sales head, joined Murali Talasila, Pwc partner and innovation leader in the discussion.
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“Yes. Startups are disruptors. A bit of a threat. But that’s a good thing for us because that keeps us on our toes as we keep innovating,” Kanwal says.
US-based software-as-a-service company (SaaS) Adobe Inc has been listed as one of the top five leading technology organisations to work for in India, a popular job site, Indeed, cited in a statement issued earlier this month.
Kanwal, who has been holding the executive position in Adobe for last seven years, cites company’s own example on how disruptive startups in India’s SaaS space are forcing multinational companies (MNCs) such as Adobe to stay on their toes. And, that is working well for the company.
“When I look from Adobe’s perspective, we would come out with update after 18 months and everybody used to wait for it. We have followed the software-as-a-service (SaaS) model for last 5 to 6 years, and now we come up with updates and new features every week on almost every product,” he says.
For Shukla, he is already on his toes leading AWS startup ecosystem unit for quite some time. While admitting Amazon not known as an entity doing a lot of acquisitions, he says, “I’d say we are a strong partner of startups. AWS provides a suit of programmes for select startups to use its cloud-enabled solutions helpful in formulating business strategy.
He adds, “In certain cases, where you need a very customised solution and there are some great startups that are solving…what we say is, ‘Yes, there are right startups to do that for you.’”
And like AWS and Adobe, many are treading this path such as Google, Walmart, Alibaba, Microsoft, Reliance, Hero Group, Times Internet, etc. They are now seeking more opportunities to team up with startups using efficient technologies vis-a-vis also helping the latter to expand into markets.
The synergy can happen in many forms such as merger and acquisitions (M&As), joint venture, partnerships, accelerator, incubator, co-working, or simply cashout. This year a total of 118 acquisition deals were recorded in the Indian startup ecosystem, compared to 129 such deals in 2017, Inc42 reported. The $16 Bn Walmart-Flipkart merger, the largest such deal in the Indian ecosystem, has been the talk of the town this year.
4 Wheels Of Ecosystem: Startups, Corporates, Government And Consumers
Talasila summed up the synergy in simple terms: four wheels of the ecosystem — corporates, startups, policymakers and the consumers — corporate should not reinvent what already exists, startups should accelerate their product development using corporates as a launchpad, government and policymakers should lend a hand by fixing issues that Indian startups face, and obviously, consumers are the fantastic source of revenue for all of these.
However, to keep the ecosystem’s wheels rolling, India needs sector-specific policies, most of which are still in the draft mode. Though over the years, the government has formulated many startup-friendly policies — in fact, there are 19 government action points, according to Inc42’s The State of The Indian Startup Ecosystem 2018 report.
In the absence of such a legal framework for many other sectors for example crypto industry, founders in cryptocurrency space have often run into legal problems. This year crypto asset exchange, Zebpay, shutdown their operations while Unocoin’s founders were arrested for setting up a crypto ATM. Similarly, many startups have been harassed by the I-T department over angel tax issues.
Further, “…our education system also has a very, very important role,” Kanwal pointed out. “It’s time we change the education system from creating blue-collared workers to knowledge workers,” Kanwal said.
And rightly so. The Inc42 report also cites various sources that say that 90% of Indian graduates are unemployable whereas most Indian tech-savvy experts prefer to relocate to the EU, the US, and other global markets for better opportunities.
Does The Ecosystem Know Better Than Corporates?
Now that corporates have agreed that startups are good for the ecosystem, good for the country, and keeps them on their toes. The next logical question is, how can the interconnectivity, the cross pollination between corporates and startups take place often?
Talasila emphasised on embracing the open innovation in the ecosystem. “There’s no way out, whether you like it or hate, you have to live with it. Be along with the ecosystem with open innovation,” he says.
Adding to it, Kanwal says, financials become the key but mostly a challenge to unlock the potential of these innovations.
“The biggest problem is, with organisations we work, is the financing. Like MSMEs, SMEs, and startups in the same bracket, financing them with an unsecured loan is bit of a problem,” he said. This is exactly when the fear-clock starts ticking. Even investors in the startup ecosystem agree, especially early-stage startups face difficulties in raising funds after seed funding.
Though to help these startups establish, expand, and scale their businesses, there are a large number of enablers — Inc42’s report points out that currently India has 195 venture capital and private equity funds, 235 international funds, over 1,500 angel investors and platforms, and various ecosystem bodies — but that is not enough.
“There is a long way to go in believing that the ecosystem probably in piecemeal type knows much better than what we as corporate know,” says Talasila.
For large companies sometimes legacy comes in the way of adapting to change. However as more and more Indian startups and professionals equipped high-level of technical skills solve core industry issues, corporates are finally noticing the potential of working with startups and taking a more holistic approach to towards developing technologies for the future.Order The Report Now