The Market of Startups in India: An Overview

Monday, 13 March, 2017

India is growing at an amazing pace and is ranked third in the startup world with an astounding 4200 startups. With its huge potential of growth in the number of active investors, growing digital consumer base, mobile first population, improving political environment and high interest from global investors, this pace is only going to gain momentum. We are seeing an unparalleled development in startups in the recent five years inspite of being considered as the youngest startup nation in the world with 72% of the founders under the age of 35 and around 85,000 employees.


According to a recent study by Nasscom in 2015, 98,473 new organizations were consolidated in India. It has a very large number of micro and small enterprises across various sectors. However, existing surveys and studies on startups focus on those that use technology. The attention on startups in India has, in this manner, come to principally focus on little entities using innovation to solve the consumer issues.


 Furthermore, for startups, funding and creating the ability to scale and finding the correct individuals are the biggest challenges. Therefore, startups that offer an open door for development and work culture are by and large thought to be those that are innovating, driven and working on their ability to scale. As a result, a lot of brilliant ideas were established and subsidized in the vicinity of 2012 and 2015, but only a small group could find the way to success and sustainability.


Relying on the history of startups in India, everything started when a few prevailing buyer-and-shopper driven tech-startups, (such as e-commerce portals, food-tech sites, online marketplaces, and aggregators) decided on taking valuations. Then, financial specialists and investors started to scrutinize the business and revenue models that India's greatest tech-startups were relying upon, and they moved their concentration from scalability and versatility to profitability.


Hence, observing the lively eco-system, a few worldwide players, with stronger finance and a desire to discover newer markets entered the scene bringing about a more competitive marketplace. India's best clashed with the world's pioneers as Flipkart went up against Amazon, Uber kept running against Ola, and InMobi fenced Facebook.


2016 was a rude awakening for the eccentric valuations of a few startups, when investors became uneasy with the unreasonable valuations of tech new companies. As a result, founders were under pressure to build reasonable revenue models that could convey genuine benefits.


Since startups are new businesses; their durability requires financial and non-financial supports and the collaboration of different elements, as angel investors, and incubators as well.


Finance is one of the most critical factors in the process of starting and running a startup. Startups utilize a range of different kinds of finance, from grants, debt and equity, as well as informal sources such as savings and investment and loans from family and companions. India faces two key issues in terms of absence of early stage financing or seed subsidizing and the concentration of subsidizing towards innovation and web based business. Venture Capital funds in India generally put resources and invest into firms that are currently creating incomes and profits, but with this logic the financing is moderately late in the startup cycle.


However, startups also regularly require non-financial support, including capacity building, management advice, improved business plans, networking and specialist technical services such as accounting or legal advice. Non-financial support is necessary to avoid hazards and better utilize the financial support.


According to a Nasscom report on digital startups, India now has approximately 110 incubators and accelerators in India that work with startups to develop entrepreneurial skills such as building a business around an idea, creating and testing a prototype and understanding the market. Incubator programs can be relatively long-term – over a year. Accelerators offer usually shorter and more intense programs to hone in on the business model, the market opportunity and the product.


India has truly become a startup nation, with a growth in the number of PE/ VCS/ Angel investors. Along with the growth in funding we can assume that the Indian startup ecosystem will also grow rapidly to move to the next level. Multiple indicators point to the fact that the startup ecosystem is not only undergoing an exciting evolution, but is also becoming increasingly attractive.

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