2017 was a year of significant change for the Indian startup ecosystem. While certain trends continued- we also saw greater cautiousness from both founders and investors, renewed focus on the path to profitability, and a shedding of exuberance — a few milestone events mark the last year as exceptional for me:
The Indian ecosystem is maturing — A record $11 billion* of risk capital was deployed in India this year (excluding PE and debt funding), primarily led by late stage investments into fast-maturing companies that have occupied leadership positions.
The leading 3: Paytm, Flipkart & Ola, alone accounted for nearly $6 billion. Capital deployment of this scale means good news overall for the Indian ecosystem, as it indicates that valuable companies are being built here. What I expect as a result is that this will percolate down into M&A’s and strategic investments into other emerging winners in 2018. Even on the demand side, we are seeing a fast evolving consumer. 2017 was the year when subscription programs by Amazon, Ola, Zomato, etc all found acceptance with the Indian consumer — indicating a departure from a saving mindset to a spending/convenience mindset. On the whole, this maturation lends validation to the India story and will increase global confidence in India.
Entrepreneurship in the mainstream consciousness – Interest in starting up and investing in bright founders remains strong – Since 2009, the number of early-stage deals has been growing at roughly 28% per annum (ignoring the sharp spike in 2015-16). This becomes evident if you look at two factors that indicate how the support infrastructure for entrepreneurs has improved:
- In 2017, the number of accelerators and incubators has exploded to close to 150 (India now ranks #3 after the US & China). Incubation has evolved into a business in itself and everyone from corporations to industry stalwarts is joining in. Geographically, Bangalore, Mumbai & NCR remain hubs, but Tier-II cities registered the highest growth at 66% over last year.
- The Central government’s multi-dimensional support and commitment to reform this year has been unprecedented. Much of this included outreach to startups, which demonstrates the underlying realization at the center, that entrepreneurship is going to be one of the key engines of job creation and growth in the country’s future. This in turn is giving way to state governments now competing for being the most supportive of entrepreneurs (for their own varied reasons).
Conversations on workplace culture – 2017 was a milestone year for women. It was the year when a staggering number of cases of sexual misconduct and abuse became public. While the falling from grace of one public figure after another (some loved, even revered by us) is depressing, it did what was long overdue — bring the acceptability of abusive behavior in question and reinforce the need for social reform in the public consciousness. While deep rooted mindsets take decades to change, the good news is that there is now discussion, and the actions of a few bold women will embolden masses of those who choose to stay quiet in the aftermath of abuse. The startup world was not untouched and found itself pulled into debate on questions over inclusiveness, fairness, culture and merit. The single biggest takeaway for me this year has been that workplace culture is not a fluffy, low-priority item for an entrepreneur/CEO. As a VC, I see poor company culture as a risk to my investment decisions. Indian businesses (particularly startups) today have the opportunity to be at the forefront of making the workplace more inclusive and gain much from this.
Moving on to 2018, I want to share 7 trends that I am following closely and expect to see more of:
- The power of vernacular: Indian language users bringing in new revenues to e-commerce
- Consumption of digital content to rise exponentially: Lower mobile internet prices presenting an opportunity to content platforms for acquiring new customers
- Increased focus on agriculture: Indian startups are starting to bring solutions & efficiency to 56.7% of the population engaged in the sector.
- An inclusive digital India: The rise of women internet users
- Voice recognition platforms proliferating as enablers
- Upsurge in M&A activity and IPO’s
- IndiaTech: Technology built for ‘Bharat’
This alone gives me so much to look forward to, and affirms my view that we are being witness to a very exciting time of India’s history, and perhaps the most significant of its many transformations.
I wish all entrepreneurs a Happy New Year and much success in 2018!
Disclaimer: Views represented in this blog are personal and belong solely to the writer and do not represent the views of of Kstart or Kalaari.