This is a quick “10 Pointer list” (could had more points easily) based on what I am seeing and have seen on Indian web space and what problems online businesses faces or common mistakes they make -
1. Majority of the people who are starting the web startups in India thinks they can make money from anything building anything, this just don’t work, the advertising model also don’t work (unless you are a 2-3 member team with little expenses). You can look at the 2007-08 posts review of startups of plugged.in,alootechie,startupdunia and see how many are still surviving ?
2. Last time I had covered this posting too, Too Spread Too Thin is a major problem in India, about which nothing can be done unfortunately.
3. Another mistake which founders do (I myself did couple of times) is to overestimated the market heavily, means not able to to understand the volume and value of the market. Most of the figures which are projected of various Indian sectors (say media or advertising or marketing) are often fragmented and the saying the market is of 350 crore often do not mean the market has full untapped potential of 350 crore.
4. Entry level barrier is too low and IP laws are non existing which means copycats pop up in matter of weeks in India, the cost of starting a web business has come down so much that anyone can start it in matter of days without building any business plan or revenue model, once a site starts getting some traction, 20 similar sites also pops up adding no value and just crowding the market.
5. Ignoring existing players – With online businesses, many times, when you start business, you fail to see the overlap between already existing players or players which are there but you never see them and later finds them.
6. Unlike in USA, All Venture Capitalists in India like to play safe so the money is only going into big players who knows how to pitch themselves or have good connection, of course, we can not blame VC for playing safe, it is their money and India is yet to mature.
7. People in India don’t want to use credit cards which often makes cost of acquiring customer very high, this hist cost of acquisition and retention is the reason why majority of the sites in India which starts with big bang either shuts down after 2 years or goes into maintenance mode due to not turning enough profits.
8. Payment Gateways – The situation of payment gateways haven‘t improved much, last month when I was looking to make to post on them and reviewing most of them, many of them were not even working properly, most of them have ridiculous fees (I call it ridiculous business model) where they are charging heavily on per transaction.
9. Last Mile connectivity – The lesser the said about this, the better it is. India seriously needs a package like Reliance Moonsoon Hungama which was offered by reliance in 2000 for Rs 500 which created a revolution and people went crazy for mobiles which now had resulted in 640 million mobile connections, now mobile connections being getting saturated, it is good time to get into broadband war for these operators and start offering Internet for free or for Rs 99. let people get the “taste” of internet, once they get it, they will automatically start using it. The reason for such long Rant is, though TRAI says India has 8 crore active users online (those who uses internet once per month), from what ever I have seen, I think India has about 3-4 crore active users, mostly in the range of 16 to 32 crowd.
10 – Short Sightedness of founders for long term – Though I really can’t blame founders for this, but many times i have seen founders looking to make huge profits or looking to exit in second or third year, this is not very unlikely scenario in India. For example, Faisal Farooqui started Mouthshut in 2000 and is still running it. he could had sold it for a decent price in 2006, may be in 2008 as well but he kept it, a good lesson for others too.
I can think of few more points but will cut down the list here only