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Startups must marry brick-and-mortar businesses for path to profitability, says Assocham

Sandeep Soni

Industry association Assocham announcing the elevator pitch programme on Tuesday for startups in 12 cities to raise funding said that it is important for young and emerging startups in India to integrate with the brick-and-mortar businesses in order to switch towards profitability instead of continued losses. “Technology startups have to be tied up with brick-and-mortar to be successful and benefit from each other even as it gets much more probable for startups to turn profitable. While chasing growth over profitability depends on the entrepreneur to entrepreneur but then it is questionable as to how long can startups fund their losses,” Anil Khaitan, Chairman, Assocham National Council on Startups told Financial Express Online in an interview.

For instance, Flipkart and Walmart came together to benefit from each other's strengths. Startups can help traditional industries with their technologies and innovation and serve them as their customer base, according to Khaitan as “with an established customer base, you may turn profitable in four-five years as you have tied up with brick-and-mortar segment that becomes the buyer and absorber of your technologies.”

This is what Assocham is looking to do with this initiative -- to integrate startups’ solutions into various industries. Assocham is the first industry association in India to have a startup council of its own, said Khaitan even as the elevator pitch programme called Startup Elevator Pitch Series is the first such programme launched by an industry body. The Assocham has partnered with hackathon and incubation platform IncubateIND and would focus on business-to-business startups across sectors. 

The programme focuses on tier-II and tier-III cities except for Delhi and would select 25 startups from each city that would be narrowed down to three startups based on the selected criteria. Assocham is also in talks with Doordarshan channel for its broadcast however the channel is yet to confirm for the coverage. Startups would be able to raise Rs 51 lakh to Rs 1.5 crore.

“Everybody neglects tier-II and tier-III cities assuming there is no traction. In reality, real traction will come from these cities that will contribute to India’s $5-trillion economy target in five years. This will also lead to employment generation and people would be less migrating to urban areas for jobs. We hope five-six startups get funded by the completion of the programme,” said Khaitan.

The programme, catering to startups being in operation for up to five years, doesn’t involve equity participation nor there is any fee charged by Assocham. Startups would gain access to technology, mentoring and marketing partnerships with venture capital investors, mentors etc., apart from capital. The programme will begin on September 7 and conclude by the end of January 2020 covering Jaipur, Pune, Lucknow, Chandigarh, Raipur, Indore, Guwahati, Kochi, Visakhapatnam, New Delhi, Jammu and Srinagar.

2015 saw the highest traction in startups with over 600 companies getting funding and more than$ 2 billion being deployed by PE and VC funds. In the last five years, investment momentum in startups has increased significantly at a CAGR of over 57 per cent between 2011 and 2015 while investment volume went up at a CAGR of more than 62 per cent.