Power of ideas: Five hottest sectors for startups that may yield healthy returns

With technology finding new ways to sneak into our lives every single day, it is little wonder that the sector has thrived and has been dishing out healthy returns for investors. This, in turn, has created a robust network of mentors, who are supporting more technology companies, creating a virtuous cycle.

Zinnov, a management consultancy that closely tracks the sector, estimates that between now and 2015, up to 600 new technology ventures will be created every year in India. The gold rush is clearly on. “Across internet services, ecommerce and travel portals at least two to three companies will be billion-dollar bets for certain,” says Vani Kola, co-founder of Kalaari Capital, an early stage investment firm.

However, picking the right bet from an overflowing technology basket is key for a new venture. Despite the advantages of money and a growing market, barely a fifth of the technology ventures set up in the last seven years have raised a second round of funding.

Industry experts reckon picking the wrong business idea can drive the failure rate even higher. “You cannot manufacture cars when there are no roads,” says Kola. ET spoke to a cross section of investors and industry experts to pick the Top Five Sectors to launch a technology venture today.

The attractiveness of cloud-based applications across sectors, from hospitality to healthcare, is driven by ease of use and lower cost.
Thi has led to India becoming a hub for young cloud computing companies. Chennai’s OrangeScape provides cloud solutions to firms like drug maker Astra-Zeneca, consumer-goods company Unilever and automaker Ford.

In Bangalore, storage company Datagres, which sells data management products to large enterprises, was founded in 2010 by Srinivasan Viswanathan, an alumnus of Indian Institute of Science.

These young companies, which need less capital, are growing faster and are more profitable compared to traditional enterprise technology ventures.

The high rating for the sector also comes from some of the biggest exits for investors in this segment. He put in Rs 60 lakh as the initial capital to start the firm. Last September, the company received first round funding of over Rs 10 crore from Nexus Venture Partners.

In the past 18 months, Mumbai-based Netmagic sold a majority stake to Japan’s NTT Communications for Rs 900 crore while Citrix Systems paid over Rs1,000 crore to acquire Cloud. com. Gluster, a cloud computing startup, was bought by Red Hat for about Rs 667 crore.


Ecommerce in India, especially in the multi-brand category, has gone from being the new kid on the block to a crowded industry.
However, web-only brands, where a business can create its own brand of products in any category like apparel or jewellery and retail it online, is emerging as the new growth opportunity.

BlueStone launched in August 2011 as a manufacturer and retailer of light precious jewellery like earrings, pendants and rings has raised $5 million (about Rs 27 crore) in funding from Accel Partners, Silicon Valley Bank and serial entrepreneurs Meena and Krishnan Ganesh.

CaratLane, Zovi and Freecultur are some of the other internet-only brands. With 38 million Indians expected to transact online by 2015, according to data from Avendus Capital, the promise of ecommerce will lure many aspiring entrepreneurs. But this is a business best run with a clear goal to build a brand in the long run.

“The online part is incidental, internet is just the channel used for sales,” says Gaurav Singh Kushwaha,cofounder and CEO of Bluestone which is targeting sales of Rs 80 crore in fiscal year 2014. “Low-hanging fruit might bring in money but might dilute your brand and confuse customers in the long run.”

While BlueStone mainly manufactures its own jewellery, others like fashion brand Zovi outsource their manufacturing. In both models, it is the lower costs associated with building a pure online brand and the quick growth that is attracting entrepreneurs and investors.


With an estimated 900 million mobile users, India is the second biggest mobile market in the world after China. And as with ecommerce that is witnessing a second coming, mobile based payments that failed to take off nearly five years ago are now being launched in newer and improved versions.

Ezetap Mobile Solutions, a company that processes card payments on mobile phones, has built technology that allows anyone to accept cards—from merchants to cabdrivers, grocers and pizza delivery boys. It allows feature phones, smartphones and tablets to be converted into full-fledged point of sale terminals.

Backed by AngelPrime, an incubator started by serial entrepreneurs, Bala Parthasarathy, Shripati Acharya and Sanjay Swamy, the venture is drawing from the failures of ventures such as mChek in the past.

Ezetap received its first round funding of Rs 19 crore from a group of influential Silicon Valley investors, including Yammer founder David Sacks and Paypal Inc co-founder Peter Thiel, last November.


It was a road trip across the hills and along backwaters of Kerala in 2009 that changed the career of Afsal Salu, 31, and two of his IIM batchmates. Quitting a coveted job at Unilever, Salu and his friends launched a logistics business built on a technology backbone,an idea they had presented in their MBA classroom way back in 2003.

They formed Delyver Retail Network, which would deliver food and groceries to homes in Bangalore.

A logistics startup needs to build an IT platform, which typically takes four to six months, besides arranging vehicles for delivery.

“Costs for a city based logistics venture can be controlled by hiring mini vans, which would drop goods in a neighbourhood that can be picked up by delivery boys,” says TA Krishnan, founder CEO of E-Com Express, which launched operations in 36 cities in North India this January. The young venture has now set up large warehouses due to increasing demand. Others like Chottu and Delhivery also provide logistics support to ecommerce firms.

Delyver’sSalu fulfilled his first order while on a lunch break from Unilever. “It’s a capital intensive business. We started with a seed capital of Rs 3 lakh,” he says. His parents, both doctors in Kerala, were alarmed to hear that their son, an IIM graduate, was delivering cakes and food to people’s homes.

But the sector is a hot area for new startups as India’s overall logistics market is estimated at over $100 billion, growing at a rate of about 20 per cent. The sector employs about 45 million people in the country, according to consulting firm Deloitte.


From crafting strategies for cricket teams to helping scientists develop new drugs, Indian entrepreneurs are building specialised companies. These firms can chew through billions of bits of data, analyse them via self-learning algorithms and package the insights for immediate use.

“Big data is becoming hot, because people are using it to predict the future,” says Ravi Gururaj, vice-president for cloud platforms group at Citrix Systems.

He said earlier it took at least Rs5 crore to start a data analytics firm. Now, with so many open source platforms available, an entrepreneur can launch a new venture with just Rs 50 lakh. One such example is Gramener, which converts insights drawn through data analysis into visual graphics.

It was a reunion in Bangalore for six friends that led them to quit their jobs and start Gramener in 2010. “We decided to do something on our own and have fun,” says Naveen Gattu, 38, cofounder. In an innovative example of how such technology can be used, Gramener helps poultry company Suguna Foods enhance the longevity for chickens. The firm finds disease patterns, suggests precautions and even makes recommendations about how much sunlight the birds must be exposed to the type of feed.

Gramener, which counts telecom firms, car-parts maker Bosch and many IT and engineering companies as its clients, now earns around Rs 1-2 crore per annum.

Source: Economic Times

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