Starting a technology venture is becoming the new aspiration among Indian youth. Too many experienced professionals are ditching the lure of cosy jobs and jumping into the bandwagon of start-up entrepreneurs. New ideas are getting germinated and giving birth to fresh initiatives. A country, infamous for red-tapes, license-raj, foreign investment regulations and scepticism toward private enterprises, is waking up to a new dawn. For an economy of billion plus population this trend is a matter of great motivation for upcoming generations.
What is the future of this start-up culture in India? Will this trend survive beyond the obvious initial euphoria? Are we going to relive another dotcom boom? Or, is it just the beginning of a new era of global dominance for Indian IT and tech start-ups? We’ll have more in-depth look for answers to these questions.
Start-up landscape in India: at a glance
- In 2017, nearly 1000 new start-ups have been added and India is currently the third largest start-up base globally. As per Department of Industrial Policy & Promotion, there are around 6300 recognized start-ups in India as of 2018; of them 2488 have women as directors, founders or partners. Average age of start-up owners is around 32 years.
- Bangalore, Delhi, Pune and Mumbai top the list of start-up destination. Tier II and III cities comprise around 20% of total number of ventures.
- B2B business makes up 40% while B2C makes up 59% of total number of start-ups. 43% of the start-ups have global business outreach.
- In 2017, top 12 start-ups raised $8.84 billion through 19 deals; that is roughly 70% of total funding injected into Indian tech start-ups. Remaining 98% companies were left with 30% of the funding.
- Q1 2018 saw total funding of $1.17 billion through 196 deals; this is half of the number in Q4 2017 (Quarter on Quarter) and the lowest compared to 2017, 2016 and 2015 same period (Year on Year).
Q1 2018 saw an increase in seed funding deals compared to Q4 2017. For the same period growth funding also increased. - YoY basis, Seed funding has remained low in Q1 2018 compared to 2017 and 2016. Growth and Late Stage funding have mostly remained same.
Opportunities for tech start-ups in India
Other than the obvious global trend and the supply-side factors like availability of many non-proprietary smart technologies; technology start-ups in India is gaining traction due to many positive factors emerging within the country.
Obstacles ahead for tech start-up in India
- Bottom line worries – Frontline start-ups have already received funding in multiple series. They are burning lot of cash with high growth expectations; especially in B2C segment. Big tickets investments are now looking for profits in these ventures. It is time for many Indian start-ups to think and perform in terms of their bottom line. In case their performances remain lacklustre in coming years, it might hamper investors’ sentiment in broader sense.
- Domestic investors’ maturity – Domestic investors are a lot more forthcoming now but they often lack right appetite to fund start-up deals. This is a challenge for new entrepreneurs, who are in conception and seeding stage. Many of them are struggling to survive despite strong potential only because of lack of correct type of funding.
- Geographically skewed concentration – Majority of the India start-ups are in the handful of Indian cities and they are drawing maximum attention. In terms of access to funding also they are much ahead of their counterparts from tier II & III cities. This is a very negative sign for the health of start-up culture in India.
- Policy bottlenecks – Though Indian government has already made lots of policy level changes and removed many regulations and restrictions for start-ups; but there are a lot to be done for attracting more and more entrepreneurs. Ease of doing business is still not praiseworthy in the country.
The pace in which India start-ups have grown in recent years is indeed commendable. Though, along with growth we need maturity too for surviving the test of time. Lot of mergers and acquisitions are happening in B2B and B2C space, which in itself is a sign of maturity in the industry. Today, India is emerging among the top 3 start-up bases in the world. Expectation is to have over 10000 technology start-ups within next few years. With new technologies like artificial intelligence and 3D printing, Indian start-ups can definitely make their mark on global scale. It is just a matter of time.