India is the fastest growing and the third largest startup ecosystem after the US and the UK. The liberated economies and affordable technologies have made it possible for the new age entrepreneur to compete with the already established players.

The service sector is the fastest growing sector in India, contributing significantly to country’s GDP growth, employment, trade, and investment. In the Indian service sector, e-commerce takes the major share of the pie, with Morgan Stanley Research report estimating India’s e-commerce market to increase from $102 billion to $119 billion by 2020. Of these, the major e-commerce players in the service-based startup industry are:

Flipkart and Snapdeal in the E-tail sector; Quikr, Sulekha and Ask Me in the Classifieds sector; Zomato and Swiggy in the FoodTech sector; Housing and Common Floor in the Real Estate sector; Ola in Transport; and Yatra and GoIbibo in the Travel and Tourism sector.

On the other hand, there are not many success stories when it comes to the product-based startups. A few names that occur to us and which have made some inroads into the Indian startup share, are Micromax Informatics, a leading consumer electronics company; Gecko, a device that works as a key finder and Goqii, a fitness tracking wearable.

Also Read: Startup Taskbob builds online platform for day to day services

This clearly goes to show that service-based startups are dominating the startup industry, while the product-based startups are yet to realize their full potential. Why is that?

Let’s find out what makes the service-based startups tick in India:

Low startup costs

Manufacturing and selling a physical product involve a heavy capital investment, time and energy. It usually requires taking a bank loan or securing a funding from investors. On the other hand, there are little to no startup, overhead or manufacturing costs involved in service-based startups. A founder can start a setup (from his home or garage), with a few or no employees, and build his reputation through word of mouth marketing. His small set-up means he doesn’t need a huge capital infusion; he can even bootstrap his business.

SignEasy, a cloud-based mobile-first solution for businesses and professionals to electronically sign, fill and send documents from smartphones, tablets, and the web, was bootstrapped by its founder Sunil Patro who had invested Rs. 20 lakh from his personal savings in 2010. Five and a half years later, this startup, based out of Bengaluru and San Francisco, has had over 3.5 million downloads of its app across 150 countries, and has processed over 10 million documents and boasts over 1 lakh paid users.

Also Read: Why Indian Startups Are More Service Oriented Than Product Oriented?

Quick launch

Service-based startups can get a business off the ground and start earning revenues earlier. All they need to do is define their service, find customers, listen to their requirements and start delivering the service. A product-based startup takes a lot of time and resources to conceptualize, design and create the product.

Also, the service sector is more dynamic and doesn’t entail logistical bottlenecks. Even a new kid on the block can undercut the market leader/conventional industries with one innovative idea. For example, startups like Couchsurfing, AirBnb, and Zostel for the price-conscious young traveler are already threatening the hotel industry.

Negligible business risk

Every business is prone to some risk, however, service industry startups face fewer risks vis-à-vis their product-based counterparts. A customer who is paying for a service usually knows his requirement, hence there is no guesswork involved, and hence, lower risk. You are providing the service and billing for a specific skill/expertise you already have. And, finally, in service businesses, customers are already committed to pay before you even start working.

Remarkable flexibility and adaptability

Furthermore, a service business is much more flexible and adaptable. Not only you can work from wherever you want, but you can easily make adjustments and customize your service as per an individual client’s needs. For example: If your client isn’t too happy with his website or campaign, you can make changes according to their feedback in real time. Products are much more difficult to improve or modify, as they may need testing, licensing and re-manufacturing.

No wonder, founders are concentrating on service-based startups and we find so many of them dotting the startup space.

Also Read: Does your startup product or service needs an online community?

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