Home / Industry / Infotech /  Start-ups are the new hi-tech job creators

Indian start-ups have begun creating hundreds of high-quality jobs across sectors as they build new products and offer innovative services.

Industry experts estimate that about 16,000 start-ups in the country are likely to have created more than 100,000 direct jobs and over 300,000 indirect ones since 2005. Start-ups that have now established themselves such as Flipkart India Pvt. Ltd, redBus and Snapdeal together employ more than 7,000 people.

“There is a tremendous amount of job creation in the start-up sector. Everybody is hiring and expanding. My portfolio of 15 companies has already created 7,000 jobs in the last five years. And this is phenomenal," said Rehan Yar Khan, general partner at Orios Venture Partners.

Ola Cabs (ANI Technologies Pvt. Ltd), Druva Software Pvt. Ltd and Sapience Analytics Pvt. Ltd, companies that Orios Venture has invested in, each employ between 100 and 150 people, Khan said.

Moreover, there has been an almost three-fold rise in the growth of new firms set up after 2005, according to software lobby Nasscom’s 2014 Strategic Review. In 2006, 162 start-ups were founded in the country. In 2012, the number almost trebled to 450 with most of the new start-ups focusing on SMAC (social, mobility, analytics and cloud) technologies, education, e-commerce and healthcare.

It said there are about 1,000-1,200 emerging companies and around 15,000 start-ups across sectors such as e-commerce, education, retail, hospitality, telecom, manufacturing and those developing SMAC technologies.

India, for instance, has more than 4,000 technology-focused start-ups. Most software product companies have eight employees (excluding founders) while some are tiny (single employee) and others have over 120 employees, according to the iSpirt Product Industry Monitor, released in February.

A majority of the product start-ups have been set up in Bangalore followed by the National Capital Region, Mumbai, Hyderabad, Chennai, Pune and Kolkata, according to a 2012 study by consulting firm Zinnov.

“As on 31 March, India had around 3,700 product start-ups. The country adds 500-600 start-ups annually. These start-ups, according to our estimates, would have hired 40,000-50,000 engineers," said Pari Natarajan, co-founder and chief executive officer (CEO) of Zinnov.

“These are high-quality jobs that have been created locally unlike those jobs created by the traditional IT sector," he added.

Start-ups typically start hiring after completing a year of operations and almost 80% of the first employees share the start-up’s core competencies, be they in technology or operations. The main focus during the second year is usually marketing, sales and customer support.

Average salaries at start-ups during their first year range between 2 lakh and 5 lakh per annum, while they increase exponentially, touching almost 12 lakh and higher, over the next few years.

Wingify Software Pvt. Ltd, a Delhi-based visual website optimizer platform that was founded in 2010, paid employees between 6 lakh and 9 lakh per annum during its first year. Currently in its third year, the company has hiked salaries by 30-40%.

In 2010, Wingify hired eight employees, all in technology and customer support. The following year, 10 employees were added—two for marketing, one for sales, three for support. The rest were engineers. The company now has 45 employees, with nearly 25 working in marketing, sales and customer care.

“There are multiple benefits in working in the tech start-up world. Only people who are passionate about technology join start-ups like ours. There is a plethora of things they will work on here, as opposed to in an MNC (multinational corporation), where they usually do the same thing day in day out. Also, they grow so fast, you can’t expect people to rise to such levels in any Cisco or Oracle," said Sparsh Gupta, chief technology officer and co-founder of Wingify Software.

Besides offering a flexible work culture, start-ups also offer perks like employee stock options (ESOPs).

According to the World Start-up Report 2012, entry-level jobs in industries in India pay annual salaries of around $10,000 while start-ups pay between $6,000 and $8,000. Industries pay $20,000-30,000 for experienced hires while start-ups pay $18,000-24,000 plus equity (ESOPs), the report said.

“ESOPs are a great way to share trust that the company is not only about the founders, and that there is an opportunity for the team to participate in building the company. It shouldn’t be looked at as something that’ll make you mega rich, but something that shows that the team trusts you enough to own (company stakes) and deliver. It is like angel investing—once you invest, you forget it and don’t immediately or most of the time expect a return," said Vijay Sharma, co-founder at Exotel Techcom Pvt. Ltd, a Bangalore-based start-up that hosts IVR (interactive voice response) solutions for small- and medium-size businesses.

As the hiring spree continues to grow, start-ups have begun sourcing resumes from various job portals and recruitment agencies. While AngelList India has a database of more than 3,000 jobs posted by 279 Indian start-ups, Naukri.com and Monster.com continue to be recruiters’ favourite candidate sourcing platform.

Meanwhile, most start-ups say they see attrition rates of between 5% and 10%, which is lower than the 17% average attrition rate of the traditional Indian IT sector, according to Deloitte Compensation Trends Survey, 2013-14.

People who leave start-ups are those who “want to go for higher education" or those that are forced to quit “when we realize we have made some mistakes by hiring" them, said Gupta of Wingify.

“The small amount of attrition is because some employees do not feel they are cut out for start-up kind of jobs, and prefer working in large multinational companies," said Vishwa Kiran, CEO of Twelve77 Software Studios Pvt. Ltd, a Bangalore-based start-up whose attrition rate is 5% annually. Twelve77, with a 53-member team, has built a CRM (customer relationship management) software called CustomerMantra.

The focus on start-ups will continue to increase as accelerators, venture capitalists and angel networks scale up their operations, said Natarajan of Zinnov, adding that MNCs will increasingly eye the Indian start-up space to acquire solution competencies and talent for local as well as global markets.

With India projected to have around 650 million Internet users by 2025, 3.5 billion mobile apps, a billion wireless users and an e-commerce market touching $105 billion in the same period, Nasscom says the market is “massive" for start-ups. It is particularly so when coupled with global opportunities in big data ($17 billion by 2025) and enterprise mobility and SaaS (software as a service) markets—forecast to touch $50 billion each in the same period.


Malvika Joshi in Mumbai contributed to this story.

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