RESEARCH PROJECT

ON

“WHY 90% OF STARTUPS FAIL IN INDIA”

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

B.SC. IN HOSPITALITY AND HOTEL ADMINITRATION

CHANDIGARH UNIVERSITY, GHARUAN, MOHALI

SUBMITTED TO

Supervised by: Submitted by:

Name: MR. PANKAJ TYAGI Name:IMRAN KHAN

Designation:_________ UID: 2041319019

CHANDIGARH UNIVERSITY, GHARUAN, MOHALI

BATCH 2021-2023
 ACKNOWLEDGEMENT

I hereby do solemnly acknowledge that I have taken my sincerest efforts in this project.
However, it would not have been possible without the support and help of many individuals and
organizations indulged along the way. I would like to extend my sincere thanks to all of them.

I am highly indebted to Mr. Pankaj tyagi for his guidance and constant supervision as well as for
providing all the necessary information to me regarding the project and also for his support in
completing the project.

I would like to express my sincere gratitude towards my friends & members of class for their
kind cooperation and encouragement which help me in the completion of this project.

I would also like to express my special gratitude and thanks to the industry persons for giving me
such kind attention and time. My thanks and appreciations also go to all of my colleagues who
formed a part in developing the project and the people who have willingly helped me out with
their special abilities.

2|Page
 EXECUTIVE SUMMARY

India, being one of the tones of world's fastest-growing economies a significant surge in the
number of startups in recent years. However, despite the conducive environment for
entrepreneurship, the startup failure rate in India is alarmingly high, with nearly 90% of startups
failing within the first five years. The following are some of the reasons for such high failure
rates:

1. Lack of market research: Many startups fail due to the lack of proper market research.
Entrepreneurs often fail to understand their target market, customer needs, and preferences,
which leads to developing products and services that fail to generate sufficient demand.

2. Poor financial management: Startups often lack the necessary financial management
skills to operate efficiently. They may spend too much money on unnecessary expenses or fail to
secure adequate funding, leading to a cash crunch and eventual failure.

3. Competition: With the rise in the number of startups, competition has become fierce, and
many startups fail to differentiate themselves from their competitors. As a result, they struggle to
attract customers and generate revenue.

4. Regulatory hurdles: Starting a business in India involves navigating complex regulatory

requirements, obtaining licenses and permits, and complying with tax laws. The process can be
time-consuming and expensive, making it difficult for startups to survive in the early stages.

5. Talent acquisition and retention: Startups need skilled and experienced professionals to
grow, but hiring and retaining such talent can be a challenge, especially for early-stage startups
that may not have sufficient funds to offer competitive salaries and benefits.

In conclusion, while there are numerous opportunities for startups in India, entrepreneurs need to
be aware of the challenges and take appropriate steps to overcome them. Proper market research,
financial management, differentiation, regulatory compliance, and talent acquisition are all
critical factors in ensuring the success of a startup.

3|Page
 Table of Contents

ACKNOWLEDGEMENT...............................................................................................................2

EXECUTIVE SUMMARY.............................................................................................................3

List of Figures..................................................................................................................................6

Chapter 1: Introduction...................................................................................................................8.

Chapter 2: Literature Review........................................................................................................10.

Chapter 3: Research Methodology...............................................................................................28.

Chapter 4: Findings & Interpretations..........................................................................................35.

Chapter 5: Conclusion and recommendations..............................................................................55.

Chapter 6: Limitations..................................................................................................................60.

4|Page
 List of Figures

Figure 1 ECommerce Market size in India Source: Business Standard........................................................................1.

Figure 2 Google Ads for Punjabiriwaaz.com................................................................................................................8.
Figure 3 Chope Phulkari Source: (S.S Hitkari).............................................................................................................9.
Figure 4 Jewellery motifs of Phulkari and Bagh Source: (S.S Hitkari)......................................................................12.
Figure 5 Important centers of Phulkari crafts.............................................................................................................13.
Figure 6 Picture showing the entered data in SPSS...................................................................................................15.
Figure 7 The variables in the SPSS.............................................................................................................................18.
Figure 8 Pie chart of Q1..............................................................................................................................................19.
Figure 9 Linear regression with dependent and independent variables as shown.......................................................25.

5|Page
 List of tables

(sample)

Table 1 The Descriptive statistics on the case

Table 2 Frequency distribution table of purchase frequency 12.
Table 3 percentage of frequency of online shopping 15.
Table 4 Preference of brand 18.
Table 5 Crosstabulation of brand vs material 19.
Table 6 ANOVA table 20.
Table 7 Model Summary 21.
Table 8: Coefficients for regression equation 22.
Table 9 coefficients value
Table 10: Variables for conjoint analysis 33.
Table 11: Ratings for the nine variables 44.
Table 12: Coefficient values for regression equation 47.

6|Page
INTRODUCTION

7|Page
In recent years, India has emerged as one of the most promising and dynamic economies in the
world. With a large pool of young, talented, and tech-savvy workforce, a vibrant startup
ecosystem, and government initiatives like Startup India, the country has witnessed
unprecedented growth in the number of startups. However, despite all these favorable factors, the
failure rate of startups in India remains alarmingly high. According to a report by IBM Institute
for Business Value, 90% of Indian startups fail within the first five years of their inception. This
is a matter of concern not only for the entrepreneurs who invest their time, money, and effort in
these ventures but also for the economy at large.

Despite the growth and support, it is estimated that 90% of startups in India fail within the first
five years of their inception. This failure rate is significantly higher compared to other countries
like the United States, where the failure rate is around 80%.

In this capstone project, we will investigate the reasons behind the high failure rate of startups in
India and explore possible solutions to address this issue. We will begin by analyzing the current
state of the startup ecosystem in India and identify the major challenges faced by startups in the
country. We will then delve deeper into the specific reasons why startups fail and examine case
studies of failed startups in India to understand the common patterns and trends.

8|Page
We will also study the role of various stakeholders in the startup ecosystem such as investors,
government agencies, incubators, mentors, and support services providers, and evaluate their
impact on the success or failure of startups. Furthermore, we will explore the best practices
followed by successful startups in India and other countries and identify the key factors that
contribute to their success.

Finally, we will propose a set of recommendations to address the challenges faced by startups in
India and suggest strategies to increase the success rate of startups in the country. We will also
discuss the potential impact of these recommendations on the startup ecosystem in India and the
economy as a whole.

The significance of this study lies in the fact that startups are the engine of innovation and
economic growth, and their success is critical to the development of any country. By
understanding the reasons behind the high failure rate of startups in India and taking appropriate
measures to address them, we can not only create a more conducive environment for
entrepreneurship but also unlock the full potential of Indian startups to drive economic growth,
create jobs and contribute to the overall development of the country.

9|Page
In the following chapters, we will present a detailed analysis of the Indian startup ecosystem, the
challenges faced by startups, the reasons for their failure, and the best practices and
recommendations for increasing their success rate.

Challenges Faced by Indian Startups:

One of the significant challenges faced by startups in India is the lack of infrastructure and
support services. Startups require a robust ecosystem of investors, mentors, accelerators, and
incubators to thrive. In India, such support systems are relatively nascent and not as well
developed as in other countries. Additionally, the lack of access to capital and funding is also a
significant challenge faced by startups in India.

Another challenge is the regulatory environment. India has a complex regulatory framework that
can be a barrier to entry for startups. It is difficult for startups to navigate complex regulations,
and compliance can be costly and time-consuming.

10 | P a g e
Funding Ecosystem:

Access to funding is critical for startups to grow and succeed. In India, funding is primarily
dominated by venture capitalists and angel investors. However, the investment climate in India is
still maturing, and many investors are risk-averse. This makes it challenging for startups to
secure funding, especially in the early stages.

Moreover, the lack of a developed IPO market in India means that startups have limited exit
options. This, in turn, makes it difficult for investors to exit their investments, leading to a lack
of liquidity in the market.

Entrepreneurial Mindset:

The entrepreneurial mindset in India is another factor that contributes to the high failure rate of
startups. In India, there is a social stigma associated with failure, which can discourage
entrepreneurs from taking risks. Moreover, the focus on academic excellence and secure
government jobs has created a risk-averse culture that is not conducive to entrepreneurship.

Cultural Factors:

India's cultural factors also contribute to the high failure rate of startups. The cultural emphasis
on family and community can create a reluctance to pursue individual aspirations. This, in turn,
can discourage risk-taking and entrepreneurship. Moreover, the hierarchical nature of Indian
society can make it challenging for startups to attract and retain talent, as employees may prefer
the security of established organizations.

SCOPE

11 | P a g e
The scope of this capstone project is to analyze the factors contributing to the high failure rate of
startups in India and suggest strategies to address these challenges. The project will involve a
comprehensive review of the literature on startups, entrepreneurship, and innovation. The study
will also include a detailed analysis of the Indian startup ecosystem, including the regulatory
environment, funding sources, and support structures for startups.

The project will be divided into the following sections:

Overview of the Indian Startup Ecosystem:

This section will provide an overview of the Indian startup ecosystem, including its size, scope,
and growth trends. It will also examine the challenges faced by startups in India, such as
regulatory hurdles, lack of access to funding, and talent shortages.

Factors Contributing to High Failure Rate of Startups:

This section will analyze the factors contributing to the high failure rate of startups in India. It
will examine the common causes of startup failures, such as lack of market demand, inadequate
funding, and poor management. The study will also explore the unique challenges faced by
startups in India, such as the complex regulatory environment and limited access to funding.

Strategies to Address Challenges Faced by Startups:

This section will suggest strategies to address the challenges faced by startups in India. It will
examine the role of the government in promoting entrepreneurship and innovation, such as
simplifying regulatory processes and providing tax incentives. The study will also explore the
role of the private sector in supporting startups, such as providing mentorship, incubation, and
funding.

Case Studies of Successful Startups:

12 | P a g e
This section will analyze case studies of successful startups in India. It will examine the factors
that contributed to their success, such as product-market fit, strong leadership, and innovative
business models. The study will also examine how these startups overcame the challenges faced
by startups in India, such as limited funding and talent shortages.

The final section will summarize the findings of the study and provide recommendations for
policymakers, investors, and entrepreneurs. It will also highlight the importance of a vibrant and
sustainable startup ecosystem in driving economic growth and creating employment
opportunities in India.

Contemporary Issues:

Several contemporary issues contribute to the high failure rate of startups in India. Some of the
most significant issues are discussed below.

Lack of Funding: One of the major challenges faced by startups in India is the lack of access to
funding. Although the government has taken various initiatives to provide funding and incentives

13 | P a g e
to startups, access to funding remains a significant hurdle for many startups, particularly those in
the early stages.

Limited Market: The Indian market is highly fragmented, and startups often struggle to find a
sustainable market for their products and services. The lack of a well-established market also
makes it challenging for startups to scale up their operations.

Regulatory Hurdles: The regulatory framework for startups in India is complex and often acts
as a barrier to entry. Startups have to comply with various laws and regulations, which can be
time-consuming and expensive.

Talent Shortage: Startups require a pool of skilled and talented professionals to build and grow
their businesses. However, there is a shortage of such professionals in India, particularly in
specialized fields such as artificial intelligence, blockchain, and data analytics.

Lack of Innovation: Many startups in India focus on replicating existing business models and
lack innovation. This approach often results in fierce competition, limited differentiation, and
low profitability.

Infrastructure: Infrastructure remains a significant challenge for startups in India, particularly

in tier 2 and tier 3 cities. The lack of basic infrastructure such as electricity, internet connectivity,
and transport can hinder the growth and expansion of startups.

Recognition:

The high failure rate of startups in India has received widespread recognition from various
stakeholders. The government of India has taken several initiatives to address the challenges
faced by startups, including providing funding, tax incentives, and easing regulatory hurdles. The
government has also launched various programs to support startups, such as the Atal Innovation
Mission and the National Startup Awards.

14 | P a g e
Several private organizations and investors have also recognized the potential of the Indian
startup ecosystem and have invested heavily in startups. The Indian Angel Network, Sequoia
Capital, and Accel Partners are some of the major investors in Indian startups.

The media has also played a crucial role in highlighting the challenges faced by startups in India.
Various publications and news outlets have reported on the high failure rate of startups and the
challenges faced by entrepreneurs.

15 | P a g e