The basis for any business is trying to solve a problem. The problem could range from something needed everyday (food and grocery delivery for example) to something that one doesn’t need as frequently (something like a masseuse).

Over the past decade, the total startups in India have shown a whopping growth, from 450 in 2016 to 127,000 in 2024. This growth is also backed by an ecosystem of angel investors (5000+), venture capitalists (1400+) and private equity firms (1100+). In addition, there are also over 1200 incubators supporting the startups. What is also interesting is that the growth is also coming from tier 2 and 3 cities. (Source: inc42)

Also, what is interesting is that out of 1,05,000 recognised by Department for Promotion of Industry and Internal Trade (DPIIT) by 2023, just over 60% (~63%) are contributed by 6 states – Maharashtra ranks 1st with about 19,000 startups (or ~18% of total registered startups), Karnataka and Delhi rank 2nd and 3rd with about 11,000 or ~10% share each. Uttar Pradesh, Gujarat and Tamil Nadu are the remaining states in the top 6 with 10,000, 9000 and 7000 startups respectively. (Source: DPIIT press release)

Tech startups in particular are seeing an exponential increase over the past few years, many of them turning unicorns in recent times. Low cost of starting up, availability of talent at reasonable costs, little infrastructure during the test phases are a few things that work in the favour of tech startups. Compare this to a traditional product business wherein one might probably need machinery for production, will need to carry inventory, will need to arrange for logistics, might have to take returns in case of obsolescence and so on. The fund raising by startups also show a similar pattern.

Some data points about fundraising in 2023:

• Fintech / Finance, Healthcare and AI remain the fastest growing (in terms of number of companies) in 2023
• As far as total funding for a sector is concerned, fintech / finance leads the charts with automotive and healthcare in 2nd and 3rd
• The total valuation of these sectors basis the funding amounts bring in SaaS and Web3 Infra in second and third with fintech / finance continue to lead the charts.

So how to start a business in the tech space?
What are the steps that one takes in order to start a business in the tech space?

• Identification of the problem – Is there a problem that one faces that needs to be solved? With the pace at which solutions are being develops, it is more a question of smartly or easily a problem can be solved than can it be solved at all
• Defining the solution – once the problem is identified, the next step is defining a solution. What technology /architecture can be used, what features will be needed, what kind UI / UX will be needed, etc at a 30,000 feet view level
• Competitor analysis – Looking at competitors as teachers is the best way to use them. What are the current solutions in the market. If there many, there may not be enough space for one more unless it is vastly different either in functionality or pricing. Also, looking at the industry as whole is important – whether the industry is growing or shrinking, are there many new startups in the same space, how easy is it to enter the market, are there disruptions that could render the product useless in the near future and so on.
• Understanding the market – Ideally, a market research is the best way to assess market potential – is the problem really big enough to become a business. Also, the market research can help with the product definition – features that are must have and good to have. The research can also be used to gauge the pricing model and price bands for the product. With budget constraints, the best way to do it would be to speak to friends and family and use social media platforms to gather data (polls and surveys).
• Defining the customers – basis the research, it is important to understand who the customer for the product is going to be, as in-depth as possible. Age, gender, geography, likes, dislikes, frequent activities, etc.
• Designing the MVP – if the results of the research are encouraging then comes the actual designing of the product – brining the knowledge from step 2 to an execution stage and detailing the features, costs, pricing models, launch strategy, etc.
• Testing the MVP – next is to choose a set of customers from the target customer segment and testing the MVP. The understanding is clear in the sense that final product will be an improved version of the exiting test product. This phase is important to avoid glaring gaps in the product from the feature or technology standpoint that could hamper scalability in the future. This is also a chance to test different pricing models with the customers – one time vs subscription, vanilla product and additional for features vs the full product and so on.
• Incorporating the feedback – Once the testing phase is over, it becomes critical to revisit the plans and see if anything needs a modification – will the current technology and architecture suffice to incorporate existing and possible future feature requirements, will the cost of the current technology ensure profitability of business in the future and so on
• Launch phase – Once the product is final and tested, comes the all important launch. It is critical to have the basic back end infrastructure in place before the launch – necessary hardware, people for customer support if that is needed, licenses for softwares, etc.
• Growth phase – once the initial acceptance of the product has been proved, one needs to invest some advertising budgets and see which platform works best – digital marketing (SEM, SMM, etc.) or traditional media (print, television, radio, OOH). Traditional media usually is far more expensive with difficult to track results and for a tech startup, may not be the ideal way to go. However, it is worth investing in all digital platforms to test and understand the platform giving the best return on investment and spend enough just to maintain a presence on the others. It is also critical to keep on upgrading the product so that one can avoid competition catching up
• Keep learning – Once the business is growing, most founders tend to relax. But it in important to keep learning – how can the product be made better, how can the costs be lowered, how can the employees be retained and so on. Also, it is important to keep assessing the progress basis the plans that were initially made. If they plans are not met, what caused the deviation and how can the gaps be made up for in the times to come.

The journey, as exciting as it is, also needs the founding team to wear multiple hats – tech, marketing, finance, legal to name a few. It can be daunting to keep doing this day in and day out. This is where Racehorse Business Consulting (RBC) comes in – to be a partner in your success. Whether it is understanding the market, defining and testing the MVP, launching the product with a sold go-to-market strategy or raising funds, we work with you to make sure you succeed.

If you have any more questions on how to start a business in the tech space or want to get your business assessed, feel free to reach out to our team.