R&D: The Driving Force Behind the Growth of Indian Startups
According to the recent NASSCOM-Zinnov report titled ‘Indian Start-up Ecosystem 2018: Approaching Escape Velocity’, India continues to hold its position as the third biggest startup hub in the world, with 1,200 new companies added to the eco-system in 2018. The report further reveals that the Silicon Valley of India, Bangalore, now has the third highest number of tech startups globally. In addition to metro cities, tier II and tier III cities are also emerging as new hubs for startups. The Indian startup industry has witnessed rapid progress in the past few years; these findings are proof. Come to think of it, there are multiple factors that have resulted in a rising number of startups across the country. For instance, government initiatives such as Make in India, Digital India, and Skill India have provided ample opportunities to budding entrepreneurs. Then comes the large foreign enterprises supplying regular funds to these startups. All forces, it can be safely said, are working towards the explosive growth of this segment.
The pertinent question, however, remains – What makes a startup successful? Well, the implementation of innovative strategies seems to be the most appropriate answer here. Unless it has something innovative to offer, be it a product or service, a startup can’t turn into a full-scale profitable business. And, in today’s fast-evolving world, achieving innovation excellence can be quite a task. This is where the relevance of the R&D sector comes in. Come to think of it, the significance of research and development towards the growth of a startup can’t be underlined enough. While many companies in the past have made the fatal mistake of not investing in R&D, the trend seems to be changing at a good pace today. On that note, let’s find out why R&D is a key element for up and coming companies to flourish and thrive.
Building the USP
As mentioned earlier, startups can’t survive without a USP (Unique Selling Point). And, R&D enables them to gain a competitive edge over other players in the market. Besides leading to the innovation of new products or service, R&D often leads to improvements in the existing product line. This helps the small businesses to build up an effective USP and stand out from the crowd. Additionally, through R&D, companies can find a way to increase marginal productivity while reducing the costs at the same time.
Finding the best market fit
More often than not, startups draw inspiration from western concepts and fail miserably when they try to implement the same in their domestic markets. Not just budding enterprises, retail giants have also encountered troubles in India when they couldn’t come up with a customized offering suited for the unique market and customer sentiments here. Home to 1.3 billion people, India is one of the most culturally diverse countries in the world. Therefore, certain products and services need to be specially customized to cater to the needs of Indian consumers. This explains why region specific R&D is required for a startup to innovate and modify its business model as per the local market for sustained success.
Availing tax benefits
It’s a common misconception that only large enterprises with big budgets can invest in R&D. In reality, however, several startups have been investing in R&D to avail direct and indirect tax benefits. These benefits include the income tax benefit for capital expenses (CAPEX) and zero customs and excise duty for the purchase of R&D capital equipment on receiving an R&D recognition certificate. Further, companies that invest in R&D become eligible to receive some financial benefits as well.
The growth of a startup depends on more than a single factor, and strategic investment in R&D is undoubtedly one of them. From helping businesses in developing a USP to entering a new market, R&D is the key to long-term success. Especially, in a country like India, where understanding the consumer can be quite tricky, R&D can offer a permanent solution. Hence, it’s high time that the Indian startup community realizes this and spends a portion of their budget on research and development.
This article is written by Ankit Garg, Co-Founder & CEO, Wakefit.co