Startups 2.0: A Re-alignment is Underway

Document created by Soumitra Dasgupta on Nov 29, 2017
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The incredible narrative of Indian Startups is nearly a decade old and arguably, we have now entered into the second phase. The euphoria which marked the early years has made way for a more matured outlook.  Having weathered the winter of funding (in 2016) and ridden the market rationalization phase, startups are now more resilient. The bugle has been sounded for Round #2.

 

A digital revolution is unfolding. Almost all Indians have a mobile, a unique identity and a bank account. Regrettably, though, the age-old challenges largely remain unsolved. Admittedly, there have been pockets of success but a quick rundown will reveal that access to healthcare, education, financial inclusion, clean energy, infrastructure still remain abysmally low resulting in the spiraling imbalance. Addressing these inadequacies is about solving India-centric problems and tapping into billion-dollar opportunities. A ‘Build for India’ theme resonates strongly but frustratingly falls short when it comes to availability of Patient Capital. We need many more philanthropists (besides traditional funders) to come forward and be willing to back startups in this space. Their impacts may well stretch beyond 5 – 7 years. The number of such companies is growing annually at 18% and there’s a dire need to highlight used cases in multiple forums to create awareness. Tier 2 / 3 startups are expanding too, accounting for 20% of the total base - up from 16% last year.   

                  

Over a 5-year period, Advanced Tech startups have shown a 30% CAGR which is driving economic value and bodes well for the future. As AI-based solutions increasingly get adopted (both existing and newlines), we may as well be looking at ‘AI-fying” businesses. More than a century ago, we started to electrify the world, and today it may be the turn of Artificial Intelligence - often touted to be the new electricity.  

 

2017, saw another thousand startups being added, of which, nearly 500 were in the B2B space – especially in HealthTech & FinTech. Enterprises (influenced by their Chief Digital officers?) are now buying from startups which presents a very different opportunity from the erstwhile B2C. Not risking obsolescence, even the traditional enterprises are pushing for digital - compounded by the holy trinity of changing business model, customer experience and culture. The new generation of users are willing to rent everything and pay only for the experience. It comes as no surprise that SaaS products have witnessed high double-digit growth.   

 

India has locked horns in the startup world with UK, Israel and China. A pitched battle is being waged on various counts like the number of startups, unicorns, their average valuation, accelerators / incubators etc. Though US is clearly ahead in the game, India ranks favorably (either 3rd or 4th) in most of the stated parameters. It is also noteworthy that World Bank has ranked India at number 100 in ‘Ease of Doing Business’. Though even a year back, we were languishing at # 140, or thereabouts. This is a great leap of faith & opportunity for us to break into the top 50 ranks. Continual governmental support is required to break down existing regulatory barriers (including those around Angel Tax) which allow for quick exits.   

 

About a million people get added to the workforce every month and 830 million Indians are less than 35 years of age. We need many more entrepreneurs who can generate employment opportunities for the teeming masses.

 

But there’s a caveat: this is not purely a numbers game. Surely not!

 

The opportunities can only be harnessed by people who have the right skills, and are able to transform themselves as dictated by the market forces of tech advancement.              

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