THIRUVANANTHAPURAM: Today, product-based startups are the ‘in-thing’, while IT-enabled service-based startups in Kerala are struggling to survive in accordance with the changes in international market.
Realising this, the Kerala Startup Mission (KSUM) has started giving special focus to the crisis-ridden companies, facilitating their shift towards a product-based approach by enabling them to develop innovative IT products.
“KSUM is already providing business support to service-based startups by connecting them with customers,” Saji Gopinath, KSUM CEO, told Express. In the past decade, the business of service-based IT startups in the state saw a substantial downfall owing to the change in technology requirements by clients. Nearly half the service-based startups are struggling to survive as angel investors have also turned focus towards product-based startups for funding.
“Though product-based startups are fewer in number than service-based startups here, they are performing better. It takes innovation to bring out a product that is acceptable to the market. Once the product clicks and its demand increases, incremental revenue is substantially higher than the incremental cost required to upgrade the product or to customise it as per the client’s requirements,” Saji said.
‘Special focus needed’
Saji said special focus was needed to develop a product based company. “KSUM is providing innovation grant and subsidised office spaces to product-based startups. We are also emphasising on physical infrastructure for service-based startups. However, it is time to focus on making innovative products,” he said.
Earlier, several service-based startups shifted base from Kerala to other Indian cities to get business and funding. However, 30 startups returned to the state last year as part of the expansion. State startups received funding of $38 million (Rs 264 crore) in 2017-18, according to the Kerala Startup Ecosystem Report-2018. Since 2016, there has been a steady increase in the flow of funds. Under KSUM, there are 1,500-plus registered startups and more than 4 lakh sqft of incubation space in various districts in the state.
‘Consider merger’
Startup entrepreneur Robin Alex Panicker said it was time for mid-sized IT companies in Kerala to start thinking about merger. “Some companies have clearly reached stagnation point. It is always better to own 10 per cent stakes in a growing 1000-crore company than owning 100 per cent in a 100-crore company that has reached stagnation. Some companies should also focus on products, leveraging their services experience. After all, business is about creating wealth for stakeholders,” he said.
1,500-plus registered startups are functioning under Kerala Startup Mission. It has
more than 4 lakh sq ft of incubation space in various districts in the state