3 reasons why India’s unicorns are under threat

Unicorns are billion dollar startups and WSJ has a really good infograpic on them.

Not surprisingly most companies are in United States, but it is also refreshing to see many names from other countries. There are a couple of names from India — Flipkart, Snapdeal and Olacabs. As these companies become more valuable, the market potential is attracting the more entrenched players from matured markets. Amazon is directly targeting Flipkart and Snapdeal. Uber is eating Olacabs lunch. And they are winning. My argument is these sexy Indian startups are under a great threat and some like Flipkart might even become a niche from being a leader in e-commerce in India.

Even though the startup scene in India is heating up, most companies are merely replicating existing models elsewhere. While there is nothing wrong in it, there is a risk that once the Indian companies have done the hard work of developing the market, large global companies can swoop in and take away a big piece of the pie.

There are still a few fundamental gaps in fast growing Indian startups. Top 3 are:

1. Non differentiated business model
2. Lower developer productivity and access to better technology
3. Inferior customer service
4. Non differentiated business models:

Fact is that the so called Indian unicorns are still but knock-offs of proven business models in US. There are several discussions on Quora on how successful business models can be copied in India, example1, example2, example3. However, internet economies are already global companies without geographic boundaries. The popular Indian tech blog site Yourstory ran an article showing how most business should just copy the business model. I hope that as companies come of age, there will be innovative geo-specific businesses, that are difficult to replicate for exiting US companies.

2. Young developers still lack the fire for perfection

There are lots of software engineers in India, but their productivity is still lower than the engineers elsewhere (e.g. USA or east Europe). Most developers will deliver the working code per specs but not strive to make it better. I have experienced this firsthand.

1. I ran a software services company with our development center in India and East Europe. The quality and reliability of code from East Europe was almost always superior to code quality from India. I feel the developers in India don’t always shoot for perfection but just for code completion.
2. If you look at contribution to open source, India’s contribution is negligible compared to number of developers and net open source consumption. There is a paper on this. More over, if you drill into geography wise contributions to some of popular open libraries, like jquery, rails, php, or anything else for that matter, contribution from India is still very low. Most developers consume these open source libraries, but rarely have the chops to contribute back. Open source contribution is work done on own volition. It is when the developers really want to write beautiful code, which will withstand harsh

Lower developer productivity means better, faster technology is still illusive for companies in India.

3. Inferior customer service

As I read this post from Quora, I could relate to a lot of frustrations trying to use services from Indian companies, especially when users have access to better customer service / experience. The mind set of several young employees even in Indian startups is still very bureaucratic. Typical example of this is the experience of Agni Raj, in his Quora post where he wrote that after 10 months of applying on Flipkart, he got a response from them that their company is registered in a different state from their pick-up location and hence Flipkart will not be able to let them ship goods from Bangalore. While Amazon allowed them to setup a shop and start selling muhc faster. Or several examples where these companies repeatedly question the motives of end users. Ola drivers repeatedly complain how the company treats them and underpays them.

Conclusion

With non differentiated business models, struggling technology stack and inferior customer service the Indian startups cannot compete head on with the established global players who lust for the huge Indian market.

In absence of technology at least the business model needs to be unique.

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