An Analysis of Indian Startup Ecosystem : April – June, 2017

An Analysis of Indian Startup Ecosystem April - June, 2017

In the era of startups, India has made a name for itself in the global startup ecosystem. India ranks among the top five countries in the world in terms of number of startups founded. The startup ecosystem in India experienced a sluggish growth in the previous year; however, with the implementation of GST and increased focus on ‘Make in India’, this scenario has been changing since the beginning of the year.

An Analysis of Indian Startup Ecosystem  April - June, 2017

Indian startups have faced many crucial developments in the second quarter of 2017. From being selected in the Google’s accelerator programme, to raising funds from the Chinese investors, the startup ecosystem has been quite encouraging. Google selected six Indian startups for the accelerator programme that has kicked off in July 2017. Startups using latest technologies such as machine learning and artificial intelligence have been chosen for the same. Moreover, owing to the slowdown of the Chinese economy and similarity in business scenario in the two neighboring countries, Chinese investors have invested considerably in startups in India in the recent past. For instance, iXigo raised around US$ 15 million from Fosun Kinzon Capital, the venture capital arm of Chinese multinational Fosun. As the mortality rate among the Indian startups has lowered, the investments have swarmed-in in huge numbers.

Indian startups have caught the eye of the Silicon Valley since long and their interest in India has grown since. Recently, Venture Capitalists based out of Silicon Valley have shared their interest to invest in 12 Indian startups. In last week of June 2017, Indian startups raised a whopping US$ 74 million in funding and around 4 startup acquisitions took place. Flipkart, and taxi hailing app Ola constitute a significant market share in the startup ecosystem of India. Therefore, investments in these companies show a positive sign for Indian startups. Moreover, investments from industry veterans such as Ratan Tata are likely to boost the overall scenario of the startup ecosystem in India.

The general attitude about the startup ecosystem in India has gained significant traction with most people associated with the industry who believe the fact that now is the best time to become a startup entrepreneur. This positive sentiment is a result of the investors’ belief that the startup ecology has picked up momentum in the last few months and is likely to be encouraging for the coming six months to a year. Moreover, government initiatives are expected to play a vital role in the startup ecosystem’s bright future. For instance, the commerce and industry department of the Indian government is planning to organize a south Asia regions’ meet of startups for exchanging new ideas and increasing interaction among them, thereby showing confidence in startups.

Although some believe that many high valuation startups are not performing as expected, however, initiatives such as Make in India, digitization, and GST are some of the reasons that will encourage the startups to flourish in the coming months. For example, on May 2017, the government of India launched the PMP or phased manufacturing programme under Make in India initiative in order to support the tech startups and increase domestic manufacturing of smartphones. Another initiative taken by the government is the implementation of GST on July 1, 2017. Before GST, startups had to register themselves to pay tax if the total turnover was more than 10 lakhs. However, after the implementation of GST this limit will rise to 20 lakhs, thereby leading to an increase in the working capital for the startups and encouraging their growth. This, among many others, will give confidence to the overall startup ecosystem in India.

According to the industry experts, the trend that is going rounds in the startup ecosystem in India at present is that better-funded companies such as Snapdeal and Flipkart, are investing their money in well-planned purchases of startups. Additionally, there has been a surge in the mergers and acquisitions among startups in the recent past that might attract more investors into investing in India startups. Top deals include purchase of One Mobikwik at US$ 41 million, and the acquisition of ZipDial Mobile Solutions at $31 million. Byju’s, an edtech startup based out of Bangaluru, has acquired significant funding from investors around the world and is looking to expand internationally through acquisition. Recently it expressed plans of acquiring TutorVista, the leading edtech platform in the U.S., from Pearson. These acquisitions will instill confidence in investors around the world, hence attract funds. This in turn will fuel the growth of the Indian startup ecosystem.

In conclusion, the scenario in the last quarter suggests that the investors’ appetite towards funding the India startups remains strong. Next quarter is likely to be more attractive owing to the economic reforms and their implementation. Startups are now focusing on cutting losses, increase their overall valuation, and attain operational excellence. These qualities along with the positive sentiments of the investors, and support from the government will make the startup ecosystem of India reach new heights in the near future.