4 Challenges Faced By Founders From Tier II & III Cities

When you think of startups, the first few phrases that spring to mind are probably things such as minicorn, soonicorn, unicorn, decacorn and hexacorn. All these terms have a common basis — they are focused on the value and revenue generation of the startups.

However, there is a great deal more to the tale than this. In proportion to the benefits that startups deliver, the difficulties that one must overcome to succeed in this endeavour are enormous.

Building a startup is, in and of itself, a mammoth challenge that must be overcome. Yet, the desire to discover solutions to problems may inspire the kind of tenacity that is required. However, it is a known statistic that over 80% of startups fail within the first three years.

Startups in smaller cities and towns face a range of challenges, some of which include, a lack of access to funding, mentoring, incubation, and acceleration as well as guidance in choosing the right legal entity.

Lack Of Guidance 

The lack of expertise and assistance regarding how to turn an idea into a business is the very first and most significant obstacle that startups have to face. Most of the founders face a dilemma while registering the startup as an entity. 

Making your transactions through the bank from the very beginning of operations, including obtaining the necessary registrations and marketing the products, among other things, are all areas that require guidance and even handholding by professionals in certain aspects of the process. 

There is a significant information void that startups in smaller cities face in these areas. In this situation, a lot of good entrepreneurs fail to get started because no one backs their ideas.

It is then followed by the development of a prototype, the identification of a client base, the determination of whether or not the problem’s scope and the scalability of the solution are financially viable, and other processes that all require consistent mentoring. 

Incubation

As a means of filling the knowledge gap that exists for early-stage startups, business incubators were heralded as a potential game-changer. 

These facilities were designed not only to evaluate the feasibility of the startups but also to mentor the startups and help build a network within the larger ecosystem. However, the vast majority of them have failed.

Most of the incubators supported by various government schemes have come to believe that they are nothing more than play-and-plug facilities providing workstations and internet connection with add-on legal and accounting services. 

Even though the success of incubators should be measured by their ability to assist in the development of a minimum viable product and their assistance in providing validation to these products. In the private space, there are no such facilities available. 

Access To Funding

The anvil of alternative finance has fueled the startup ecosystem across the country. 

On the other hand, its adoption in less populous cities and towns has been proportionally low, making it difficult for startups to obtain financial support. 

Since there are no other sources of funding available, startups are forced to rely solely on the funds they can raise from family, friends, and, in some cases, banks. This has a big impact on deterring young people from working in startups in smaller cities.

Scalability

Scalability remains one of the most significant challenges that small-town entrepreneurs face. Startups based in larger cities may find it relatively easy to expand into smaller cities. 

Startups based in smaller cities, on the other hand, may find it difficult to expand their operations to larger metropolitan areas. This is brought on not only by a lack of financial resources but also by the absence of the right talent for the team, resources like machinery and the know-how to maintain it, as well as the availability of cutting-edge technology. 

Conclusion

Though the number of startups in tier II & III cities has increased, and there are currently more than 350 registered in J&K, the number of startups that have overcome these challenges remains minimal. 

Due to the significant demand for innovative solutions, startups’ potential for scalability and exponential growth, and their reliance on technology, startups are crucial to the development of a thriving and scalable ecosystem. 

Understanding the specific challenges that startups face and developing collaborative solutions to these problems is therefore critical.  

As a result, paving the way for institutions such as incubators and accelerators, angel networks, and venture capital firms, as well as increased interactions with existing startups, can provide mentoring and guidance from professionals. This would provide a significant advantage to the local startup population while also creating local job opportunities. In time, the size and number of startups in these regions will grow.