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Cries for Protectionism
Start-up business models are largely unsustainable without raising additional funds from investors. The staged and performance-based nature of finance available to start-ups creates a valuable strategic opportunity for their competitors. A prudent strategic response is to pursue innovations that complement local realities instead of clamouring for government intervention.
I am indebted to an anonymous reviewer of this journal for providing insightful comments on an earlier version of this article.
The various definitions for a start-up firm may be based on metrics of age, growth, revenue, and profitability, or on metrics of novelty and scalability. The Department of Industrial Policy and Promotion defines start-up as a company “working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property” that is less than five years old and has a revenue of less than ₹25 crore in a year.1
The start-up firms—new entities with novel business models—in India witnessed a record capital investment in 2015 at $8.2 billion. A start-up was funded every 10 hours on an average, considering 890 deals consummated during the year (KPMG 2017). But the willingness to invest in Indian start-ups has decreased significantly since then, and the total investment in 2016 at $3.3 billion was lower than the previous year by 60%. A number of promising start-ups of 2015 shuttered, while others laid off employees (Ayyar 2016).
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