The Startup Dilemma

So, the government has finally come up with a kool-aid scheme to help “Start-Ups” though on reading I wondered if it once again is out of reach to vast majority of Entrepreneurs and targeting the ones who are already beneficiaries of a new way of investing.

But before we go further, what exactly is a Start-Up?

Searching for Start-up on Google gives me this definition “a newly established business.” The number of books where start-up as a word has been used has shot up in recent decades

While many of us would think of a start-up as a technology firm (or one that uses technology to provide a non technological service), when you see a new shop opening at the corner, the guy is most of the time doing a start-up. Of course, we don’t use that in that context since it doesn’t seem “sexy”. After all, you really cannot compare a Flipkart (which is a seller of a lot of items) to the new Grocery strore coming around the corner, would you?

The film “Joy” revolves around one such Entrepreneur and like any of the thousands of Entrepreneur’s who crop up day in and day out, the key issue for any Entrepreneur is not whether Tax is a burden or not. Most of the time, his biggest problem is availability of finance.

New business by its very definition is a risky proposition and it doesn’t matter whether you are starting something that is entirely new way of doing business (Uber / Amazon for instance) or you are just opening a grocery store / a hotel in a area you feel in under served, Capital is the biggest impediment most of the time.

Because its seen as high risk, Banks will not fund you without collateral (generally it comes to a point as to whether your dream is strong enough to risk your property in an attempt to make it fly). Private finance (which again comes with horrendous interest rates) is hence the only option for those who don’t have the collateral to enable accessing cheaper finance of banks.

If you are resident of any of the major cities of India, you would have heard about something called “meter baddi” (baddi in Kannada being Interest). This is a form of finance that is given out to Vegetable Cart Sellers / Flower Sellers among many other small businesses where the risk is supposedly so high that charging 10% per day is seen as being normal (in other words, you get 900 Rupees in the morning and need to pay back 1000 by evening).

Outside of the privileged circles, life is pretty tough. So, even though the intention of the government seems great on paper, there are issues at stake which cannot be solved by funding fund of funds. What we instead need is encouragement for Micro finance companies which are willing to take that risk (rather than making them unviable)

Lets not see every start-up through the eyes of it being a “undifferentiated products or services or processes”, the likes of which do not happen without there being a bigger foundation in society when it comes to accepting entrepreneurship as also a way (rather than just being about getting a good job).

While its good that the government is pro-active, hopefully it can also look beyond the trees for a entire forest of entrepreneur’s in India struggle with real problems day in and day out.