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11 Most Critical Challenges Faced by Startups in India


We see a lot of startups in India. There are a lot of people I have met till now who say that they want to have their own business. Even my friends come to me with different ideas for the startups and say that let’s do it in partnership.

So let me make you clear my friends that starting a business or a company is not so easy. In excitement, they do start their company but later on, face a drastic business failure and then they hold their head and keep on thinking where they went wrong.

Before jumping into starting your business, you need to follow some rules or rather some important steps so that you also do not stand in that queue where so many people are standing after getting failed in their setting up of business.

There are many challenges which you will be facing in the journey of starting a company. So let us look at some of the main challenges and study them in detail so that you are ready to face them.

What’s in it for me?

  1. Culture and Awareness
  2. Social Issues
  3. Technology
  4. Finance Issues
  5. Sustainability Issues
  6. Regulatory Issues
  7. Taxation Issues
  8. The Imperfect Education System and Conservative Lifestyle
  9. Lack of Support Networks and Entrepreneurship Ecosystem
  10. Lack of Angle Investors in India
  11. Human Talent
  12. Conclusion
  13. Frequently Asked Questions about Startups in India

Culture and Awareness

You need to do deep research on your target customer. Until and unless you know about your customers, you will not be able to serve them with the best offering that you will create.

If I talk about the Indian market, it is much diversified. You will get to see many different types of cultures.

Hence, it is necessary that before manufacturing and launching your product into the market, understand the needs and wants of the customers, study about their culture, etc.

Social Issues

There are many social issues that we have to tackle to move further. Let us have a look at some of the social issues:


A doctor’s son doesn’t need to also become a doctor. He/she can become an entrepreneur. Most of the startups fail just because they do not get proper guidance.

It may happen that your family does not have a business background. So the people of your family might not be aware of the important things required for setting up a company.

In other words, they might not be the proper mentor for you and hence, this leads to a lack of quality mentorship.

Consumer behavior

As I have already mentioned above that the Indian market is diverse nature. A lot of different religion following different culture lives in India.

These make a person difficult to understand their behavior as it changes every 30-40 km and difficult for startups to create a marketing strategy for their goods and services.

Market structure

Indian market is very large, unorganized, and fragmented. This makes it difficult for startups to launch any goods or provide any service in the country.


This is also a very important aspect of setting up a company. If your startup is digital-based then you might not face any problem.

But if you want to set up any physical or brick and mortar store then you need to give it a thought because it forms a very important part of the planning stage.

Women entrepreneurship

In an Indian society we generally see that females are seen upon as staying at home, cooking for the family members, taking care of their kids, etc.

But now is the time, we should encourage women to start their own business if they are willing. We should show them the path and guide them. So that we can get more and more women entrepreneurs from our country.


In this 21st century, technology is in huge demand in the business sector. It helps a lot in doing business, makes the day-to-day activity very easy.

But it is a challenge for new startups as they do not have such a large amount of money so that they can invest in it. Also sometimes it happens that a person is having a great idea but does not know the proper usage of technology.

In the initial stage, they do not have money to even hire someone to work for them which leads to dropping the idea and hence a budding entrepreneur dies.

Finance Issues

This is the major issue in setting up a company. Finance is required in every stage without which you cannot start a business. This is an issue because people do not have that much personal income which they can invest in the business.

And if they go to banks for loans, they either give it at a higher rate of interest or ask for collateral security which some of the people are not able to fulfill the required criteria.

To know more about Startup Funding in detail, check out our blog.

Sustainability Issues

It means some issues affect the business in working sustainably. This includes a lack of information provided to the entrepreneurs about the sustainable opportunities which they can undertake to serve their society.

Hence, they are unaware of the potential they have while setting up the company. Also these kinds of enterprises do not get much importance when they go for public funding.

Regulatory Issues

There are a lot of government rules and regulations existing in our regulatory system which affect startups directly or indirectly.

Sometimes it happens that the owner of the startup has to make multiple trips to government offices to get registered or seek any clearance.

Taxation Issues

Since the budding startups do not have huge funds with them, they are not able to meet the taxation criteria as they do not earn a huge profit at the initial stage of the business. Hence, it forms a hindrance in the path of setting up a company.

The Imperfect Education System and Conservative Lifestyle

Indian education is such that they give more knowledge on a theoretical basis but lack to give any practical exposure to their students. This ultimately acts as a hindrance if any student wants to have his startup.

Also, they do not get the knowledge of all the areas of the business such as sales, marketing, technology, management, finance, accounting, etc.

How can we forget the Indian conservative lifestyle! Still many families in India do not encourage their children for doing or setting up a business of their own.

They encourage them to simply take the job which can earn them a living and avoid them taking any risk.

As I already mentioned above about the women not getting the opportunity to start their business. This is also the result of conservative thinking of Indian society. Although the scenario is changing now in this 21ts century, India is still to go a long way.

Lack of Support Networks and Entrepreneurship Ecosystem

There are many investment institutes such as angel investors, venture capitalists, etc which provide funding to the budding startups.

But India lack in this field. It does not have that much investment institutes which can support the startups.

Yes, we can say that there are some in the major cities but not everywhere in India which makes it difficult for the budding entrepreneurs of other cities or villages to gain funding.

Lack of Angel Investors in India

Unlike the western countries, India has a lack of angle investors which does not allow the startups to grow since these are the institutes that fuel the budding startups.

Nasscom once said that for a successful startup ecosystem in India there is a serious need of angle investors as they help the startups in their initial stage of business operations. But India lacks it.

Human Talent

In the initial stage of setting up a business, it is very difficult to hire any person for doing a job for that startup.

As they lack money and do not get a proper source to raise funds, they are not able to pay the person they employ in their company to work for them. Hence they either try to do it by themselves or find either way out.

These were some of the challenges which the startup, specifically Indian startup face. So, if you are thinking to start a company, you must do research and make a proper plan for everything. Be it a matter of funding, target market, product designing, store location, etc.


There are many challenges faced by startups in India nationally and internationally.

Nationally, it has to face the rules and norms of society, government, personal life problems, funding problems, etc.

Internationally, they have to compete with big companies that already have a huge share of the market globally. So it makes it difficult for a startup to stand out in the market and compete with them.

Frequently Asked Questions about Startups in India

Problems faced by startup entrepreneurs in India.

I have explained all the possible problems faced by Indian startup entrepreneurs in detail. I hope it was helpful to you.

Financial challenges faced by startups in India.

These are as follows:
1. Lack of angle investors
2. The high-interest rate of private institutes
3. Lack of startup incubators
4. Submission of collateral securities for loan
5. Paying tax 
6. A lot of paperwork for acquiring a loan from government banks



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