Angels and VCs in India seem to be living in a "third world" in terms of their risk appetite and appreciation of a new concept or idea. A major part of funding to startups in India goes to clone-the-western-markets companies like Flipkart. In such scenario how does one pitch to a potential investor for a new idea?
I'm not sure VC's and Angels in India are any more risk averse then anywhere else though I am totally ignorant of the Indian market. If you ignore the hype and stories you read on Hacker News and TechCrunch very few startups receive any form of funding, those that do it's not until their product reaches some level of maturity especially with new concepts.
Projects which do receive funding tend to always be built about solving a single problem more easily then someone else could do. As such it's rarely about reinventing the wheel more about repositioning the wheel.
With this in mind, the key is to demonstrate that the problem exists and that a need for a solution is there, having competitors is a good part of the validation process. Proving how different or why your solution will change the market is the next step, this is a great point to be demonstrating inovation. Maybe the answer is to look at pitching, with less emphasis on the innovation and more on the problem you intend to solve?
If you dont want to go the straight way of cloning existing solutions, what you can do, is to combine some into new ones.
For example, in IT, company doing DNS registration, another company doing cloud computing and another one doing e-commerce, can be combined into single platform, where the relationships between these are exploited for the proper profit optimization.
This seems to be the best way for India based startup.
To clarify this, the relationship I mean is like customer buys first domain, and then setups the website (like SaaS), but then he wants to make money so he setups the e-commerce, and then he wants to have more customers, so he gets advertising contract.
This is maybe not the best example, but many products are selling just better as combos. So instead of cloning single one, you clone multiple ones and sell as one, and all you need to grasp are relationships between these, like in the above example.
This works on any scale in any case, it's universal concept, it's the idea of innovation, it's not limited to services only nor to any country, situation or anything else.