Afflicted with real questions—not just startup buzzwords—aspiring founders in India must rethink scale, funding, and survival. It all begins with mindset, models, and meaningful action. That is what Sundara Nagarajan, Managing Director of Innovation Scaleup Advisors, said during an engaging session at the EFY Expo in Pune.
Rather than simply calling it the ‘starting of a business,’ the word ‘startup’ captures the ambition and vision behind it—a captivating pursuit of today that builds tomorrow. But when the dreamers step into reality, one asks, “How do I raise capital for my startup?” Another adds, “I do not even know how to register a company or find funding—where do I begin?” Queries keep flooding in, “Should I work part-time before jumping in full-time? What is the success ratio for startups? Are product businesses more successful than service ones? Can services be productised to scale? What happens if the team quits early on?”
These are not just theoretical questions, but real concerns from people ready to act, not just study. And that is precisely where I begin: action. In entrepreneurship, this is fundamental because general case studies rarely help. Every business is unique. Success does not follow a script—it follows your ability to move forward, one successful decision at a time. One must be ready to work within one’s means and business context.
Years ago, when someone said they were ‘starting a business,’ it usually meant they had lost a job, given up an academic or government service, or failed a competitive exam. A few were drawn to an opportunity they perceived as a more valuable use of their time in life. Their family and acquaintances generally did not encourage them in India. Today, the situation is somewhat better in that respect of social excitement. But, not all such business enterprises can be called a startup.
The intention behind the word ‘startup’ is rapid scalability, and it is important to understand that. For example, running a local tea stall is a form of self-employment—honest, hardworking, and often sustainable. But building the next Starbucks—that is a startup. Scalability originates from the economies of scale—the ability of the enterprise to grow profitability (acceleration of profits) in relation to its revenue growth. That is where venture capitalists enter the picture.
India is a nation of traders, businessmen, and entrepreneurs. Approximately 65% of earners operate businesses, while fewer than 30% hold formal jobs. Grassroots entrepreneurship is both widespread and vital to the economy. It is not limited to startups or large companies, but includes daily ventures—a vegetable vendor managing sourcing, supply chain, and sales, servicing a high-interest loan is also running a business with a dynamic strategy.
Success and failure in startups, beyond the hype…
Around 95% of startups fail—a hard reality. Statistically, only 1 in 20 is likely to succeed. But the picture is more nuanced. Some business models, like product distribution or services in renovation, plumbing, or electrical work, have a higher probability of success. Yet even in these, 60-70% still fail, mostly due to capital exhaustion, often within 10 years. Surviving beyond that 10-year mark usually signals cash flow, profitability, and resilience. The truth is, business operations are complex, and success is rarely just about the idea.
Suppose I represent Toyota—I am not making the product; Toyota handles production, marketing, and sales strategy. They give me a price, and I open a dealership, manage inventory, treat customers well, and sell the cars. My main job is operational—managing working capital, paying Toyota for stock, and ensuring I sell the cars quickly enough to recoup the investment and earn a small profit, all while serving a specific area in the city. This business model is not innovative; it is operational and about execution. And over 60% of such businesses fail, often due to bad execution.
Now, when you are starting a technology startup, such as inventing a vaccine or something completely new, the probability of success is very low—less than 1%, approximately 1 out of 400. This is because such startups involve fundamental research and development of new technology, where no one knows precisely how to do it yet. People starting a business need to understand the type of business they are starting and choose their path accordingly.
Do you remember the story of Edison and Tesla? Edison was more of a businessman than a scientist. He started his first business at the age of 15 by distributing newspapers, an innovation at the time that he knew could make money. Most of his inventions were based on electromagnetic theory and the technological advancements of the time. This is known as the Edison quadrant—a well-understood technology with immediate market applications.
On the other hand, Tesla pioneered new technology development without a clear commercial application strategy. Unfortunately, he died poor, showing the reality of success in science versus commercial applications.
Today, we hear many buzzwords like artificial intelligence (AI), generative AI, agentic AI, and artificial general intelligence. Most of the audience understands terms like LLM and their commercial use. This is application innovation—relatively low risk and mainly market risk, not product risk. For example, services like Swiggy, Zomato, Ola use cloud-based internet technology to deliver food or rides. However, starting a digital laundry service would be less successful because the affordable alternatives do not justify it. So, application innovation must achieve innovation adoption (customer experience) and sustained usage (customer success).
When considering any business, you must assess the market’s size and the likelihood of continued use of your solution. What people today commonly refer to as deep tech often causes confusion. The key factor with deep tech is that it involves both high levels of technological innovation and high-value, evident, practical applications, sometimes, multiple application domains. In other words, it is not just about using advanced technology, but also about creating fundamentally new technology with significant real-world use almost immediately.
Here comes the vaccine example. In such cases, relentless scientific research is essential. The problem space is clearly understood, but a solution has not been found yet. For example, another application case is wanting to travel from Delhi to San Francisco in three hours—there is no service now. But, if it existed, there would definitely be a market for it. The challenge is creating it at an affordable price. So you need a sustainable business model combined with technological inventions. That is deep tech—solving a known problem in technology innovation and appropriate execution. The market is clear because the problem already exists and affects many.
How to turn the vision into a venture: raising capital
In my generation—I graduated with an engineering degree in 1980—starting a business in India was extremely difficult. There was no funding, no startup-friendly support system, and licenses were hard to get. People like Dhirubhai Ambani, who began professional life in a petrol pump and built Reliance, were exceptional entrepreneurs. But today, things have significantly improved from the ecosystem perspective. The government is more supportive, more willing investors are visible, and venture capital is available if you have a good business idea.
The government has also launched the Startup India programme and supports technology business incubators, especially for students. If you have an idea but are unsure about how to start a company or navigate the legalities, joining an incubator is the best step. There are over 1500 incubators in India, both in educational institutions and those run privately. They provide mentors, services, and networks to help you nurture your idea and grow the business model. What matters is having a strong idea with business value.
For those wondering how to register a company or transition from employee to entrepreneur, this is an ideal time to start up in India. With the support of a growing system, it is only getting better.
The leap from employee to entrepreneur: Is it time?
If you are an employee, you essentially exchange your time and expertise for money. The difference in pay across professions is determined by the market. In the past, employees stayed with companies for 30–35 years, not necessarily out of happiness but due to a lack of choice. Today, the scenario is different and there are more opportunities for the talented. If employees are good, they will find jobs.
The future of jobs looks like one professional serving multiple enterprises concurrently, and engaging in competitive collaboration. We can already experience this model in India, especially in the startup community.
Transitioning from employee to entrepreneur starts with financial literacy and stability. If you want to leave your job to start a business, check your personal finances first. How do you manage your personal wealth? Will you survive for two to three years without a monthly salary? If not, do not start a business. Learn how to manage money first. Thankfully, personal finance is now taught in schools. Learn investing and understand returns. You are not ready to run a business if you do not understand investments. Even business leader jobs in large, well-established companies may not prepare you to design and run your financial system.
Again, if you are not business-savvy but skilled in technology, consider finding a co-founder who handles the business aspects. Once you are financially stable, the idea comes next. A business starts with a problem and offers a solution. You must solve a problem for a human willing to pay for the solution. For instance, your idea cannot be for the manufacturing industry—who in the manufacturing industry suffers the problem you are solving, and is willing and able to purchase your solution?
Problems are not always functional. People buy products for emotional or social reasons too. A Rolex, a Timex, and a mobile phone all show time, but people choose based on needs beyond function, like status or identity. This concept is referred to as the ‘job to be done.’
Validate your idea by identifying who has the problem and if they are willing to pay for the solution. Do not build the product first. Listen to the prospective customers about the problem they experience, in the context of your idea and its possible application. For instance, if I built an ultrasound device to detect sugarcane pests, I should first check if farmers face this problem, what they are doing about it now, how much their loss is, and whether they can afford such a solution.
Once you have validated your idea and defined your value proposition, you form a team and approach incubators—preferably ones that match your domain (agri-tech, health-tech, fintech). The early phase is like pregnancy—delicate and full of care. When customers start paying for your solution, you are reaching the ‘product-market fit’ stage. Your baby is now born into the world, and it has a challenging life to live.
From product-market fit, you move toward business model fit, like childhood, adolescence, to adulthood. Initially, the entrepreneur drives everything, but as the business matures, a team is needed to run it. I call this flipping the management—from entrepreneur-led to systems (and teams)-led. This is a very challenging phase for most entrepreneurs who aspire to build rapidly scalable ventures.
Eventually, disruption happens. Someone will offer a better solution to the problem you are solving today, like app cabs disrupting the taxi model. This entire journey, from idea to thriving business, typically takes five years, with an additional two to three years to reach maturity. Some products die faster than others, like Nokia feature phones, depending on how easily customers can switch to the new disrupting solution (smartphones in this case).
Funding your startup in its early stages can be challenging. The only sources are the 3 Fs: friends, family, and fools—and you risk losing them if the startup fails. As I said, deep tech’s success rate is very low; let’s say, about 1 in 400. Only government grants through incubators are available to support such high-risk, fetal ideas, based on their potential impact on social benefit in India. A practical alternative approach is to attempt to solve the technology problem as a PhD scholar (academic research) and then commercialise the results through appropriate research commercialisation (e.g., with the help of a technology business incubator).
From startups to achieving product-market fit, angel investors can provide assistance. These are wealthy individuals willing to take a risk on promising ideas. Post-product-market fit, you can approach venture capitalists (VCs), but only if your business has the evidence to show the potential for rapid growth and economic value creation.
For example, VCs seek startups that can grow ten times or more in economic value. Out of ten investments, they expect all to show the promise to grow 10x. Most would fail due to the inherent risk of execution, but let’s say one or two succeed to create capital appreciation. Recently, IIT Madras incubator saw substantial return, according to media reports, on its Ather Energy investment. Such outlier success from a smaller part of the portfolio helps the VCs recover their invested capital and provide decent returns to the investors in its fund. VCs invest and monitor/review the portfolio startups, but do not manage actively —they stay minority shareholders.
Private equity firms come in later stages of a venture’s life, between thriving and maturity and after. They invest larger amounts and may take control, especially if a company is underperforming. They help scale or turn businesses around, sometimes replacing members of the management.
Raising capital is a journey. From idea to business model fit, it is challenging. Investors look for big returns because safer options like mutual funds or lending offer good returns at a lower risk. Ultimately, most investors make an emotional decision based on the confidence they have developed in the entrepreneur by observing evidence. Investors are human partners in your venture with an asymmetric relationship. Understand this before you approach investors. Starting a product business is like making a movie—you do not know if it will be a hit. You must invest, build, and wait for customer response. That is the entrepreneurial game.
Selling technology, product versus selling service: choosing a business model
One must begin early to develop a business model. If you are inventing something, you should first invest personally in it. The government offers grants—particularly in India—so use them. Protect your idea appropriately. A good patent attorney will know how to reduce costs.
Patenting is not as expensive as many believe, especially in the context of the business potential. This is a myth, largely due to a lack of understanding. You can protect your idea for under `100,000. It is not necessary to file a US patent immediately. There are ways to preserve the idea now and file internationally later, if needed.
Intellectual property management know-how is essential for anyone pursuing a technology-based business. In technology application, the ideal timeline for an idea to a working business model should not exceed three years. If it does, something is likely wrong. If you are still struggling after three years, others will likely have already executed the same idea.
Should you take professional assistance? Yes. Whether it is venture capital or government funding, you require specialists to help you secure these funds. You cannot manage everything alone. Many fail because they attempt to do so. Many entrepreneurs do not internalise or are experienced with opportunity cost and non-binary decision-making. You are an expert in engineering and technology. But when it comes to presenting your idea to others who are not familiar with the depths and nuances of your know-how, you will benefit from others who can support you. There are specific processes, taxonomy, and norms followed by other agencies such as government grant providers, angel investors, and venture capitalists.
Building a strong network of advisors is a wise allocation of an entrepreneur’s resources. Now, let us clarify the terms: technology, product, and service in the context of business models. Business model is the strategy (choices you make) to make money (cashflow, profitability). The operating model is your means to execute your business model and strategy.
Many in India describe their work as a service business model, but in reality, it is labour provisioning. For example, a chartered accountant or IT consultant or a plumber billing by the hour or as a flexible retainer is essentially selling labour, without direct employment conditions. These are professional services and have a time-tested, proven business model, and they have limited scalability due to the tight relationship with the number of people (and resources) deployed.
Labour arbitrage is an important global economic opportunity that India has been benefiting for decades. A professional may earn $65,000 in the United States and `650,000 in India. Someone builds technology to facilitate the labour delivered as a service remotely. A labour-based business is entirely valid. However, it is similar to employment—trading time for money. For example, how much would someone pay for one hour of your time? That makes its value highly subjective and competitive.
A technology-enabled service business model in our context is about delivering a transactional experience, supported by a product, or many products, combined with intangible intellectual property. The essential difference of the technology service business model is that its transaction capability can scale up or down nonlinearly on demand, vis-à-vis the number of people (and resources) deployed. The difference also lies in the payment mechanism. With a service, you pay per transaction. You do not buy the car; you only buy the ride (consumption value). The service business model transforms the raw technology capabilities into a customer experience priced appropriately for the customer’s context. Economically, it converts capital investment into operating costs, and transactional revenue. Imagine all that is involved behind an airline business that ultimately sells you a ticket to travel to a destination and gets you there safely and promptly. A structured business service can be priced based on the value it delivers. It has defined operations and a replicable model.
A product is sold once and used repeatedly. For instance, air-conditioning as a service—rented, maintained, and billed monthly—is an example of servitisation of air-conditioning. Buying the AC unit makes it a product buy. The underlying cooling mechanism—energy efficiency, auto controls—is the technology that is embedded. Technology itself is not consumed; it enables the product and the customer experience. The critical takeaway for a technology inventor is to consider the most suitable model for their invention: technology licensing, product creation, or service enablement? Each business model is valid but has different characteristics for building and managing a venture.
Whatever you build, decide whether to deliver it as technology, a product, or a service. That is business modelling. Services require more capital upfront and offer income (economic recovery) per transaction. Products need proportionally less capital and offer returns per unit sold. Technology, though lower in price, may power multiple products and services.
The entrepreneur mainly drives the journey from idea to business. The founder’s personality is vital. In large companies, an employee/professional typically starts at the bottom—as a trainee or sales engineer—and advances in accountability over time. In a startup, the founder is the chief executive officer from day one. The entire structure is built afterward. The founder’s primary role is managing the business model and building its operating model (systems and people).
Beyond the idea, how will the business make money?
Making money (sustained cashflow, profits) is the core of business, even for social entrepreneurs. Social entrepreneur must also make money; the only difference is that the money stays within the enterprise and cannot be drawn out. As a startup founder, you cannot hire everyone—you do not have the resources. So, you fill every gap yourself. Imagine a soccer match: you need 11 players, but you are the only one on the field. You play every position—goalkeeper, striker, defender. If you defend well and manage to score a goal, you can get one more player. Then the question becomes: Which position should you hire? Who saves you the most time/effort? Your time is your most expensive resource. What is the best use of your time to score well as a team? Who could help you deliver customer value better/faster, or cheaper than you?
Permanent jobs are shrinking. People will be hired for skills and competencies, sometimes across multiple companies. So, build your team thoughtfully by combining partnerships, outsourcing, contracting, and employment, thereby building elasticity in managing your total cost of operations
As your team grows, choose roles that free you up the most. Keep asking: where is time being wasted (from the customer’s perspective)?
Now, consider another analogy: war. You only win when you take ground and plant a flag—that is delivery. Delivery managers create customer value, with their teams. Everyone else supports them. So, delivery is the army. Systems management is the navy—it moves troops, builds bridges, enables delivery, and improves effectiveness. These are your middle managers and leaders. They must understand business model, strategy, and the operating model. ‘Middle Managers’ are the true strength of excellent enterprises. In the context of startups, these roles are fulfilled by the startup’s core members, on whom the entrepreneur relies.
Above them is business model management—the Air Force. It does high-impact work. Functional leaders, such as those in HR, tech, and sales, operate here. They must understand their function in the context of the business strategy and operating model. They make key decisions.
A good CEO is like Lord Krishna in the Mahabharata war—a supreme driving force, getting everything done without taking arms. Not running any one function, but present in all of them. The founder begins operating at the bottom and becomes free as the company scales.
But reaching that stage takes careful planning. The system must be built and every role must be filled eventually. Where there is a void, you do the job. This is an important behavioural trait essential for team members of a startup—they are like the players in a good soccer team: they have positions assigned, and they run around the whole field to defend and to score goals. However, as the leading entrepreneur, you must not always jump into crisis management and do it all alone—that will limit your scalability. Every time you get an opportunity, explore how to develop and rely on others. The key capability of an exceptional entrepreneur is to appreciate and strengthen both sides of every paradoxical situation they encounter, and develop
Scalability often depends on this—bringing in the right people. In India, 91% of the economic value comes from large, listed companies, while only 9% comes from over 100,000 SMEs. Just 1000 companies generate most of that value. Why? Because most SMEs do not scale: some by design, most by default. The main reason is the leading entrepreneur, their beliefs, and values. Many cannot relinquish control or think beyond mere survival. That is the real problem; rising above that is essential to build scalable enterprises. The entrepreneurs must scale up ahead of their enterprises.
Based on a session titled ‘Building and Scaling up Technology Ventures’ delivered by Sundara Nagarajan, Managing Director of Innovation Scaleup Advisors Private Limited, at the EFY Expo held at the Auto Cluster Exhibition Center, Pune, on 17 May 2025. It has been transcribed and curated by Shubha Mitra, Journalist at EFY.
