The Evolution of India’s Startup Ecosystem

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The Indian land is no alien to the concept of business and trade. From trading activities that erupted during the Kanishka Empire during the 1st Century to 80’s where the nation took a stand on commodities like Jute, cotton, and spices. The idea of owning a ‘business’ runs in the veins of every Indian.

Confined to cultural, religious, and social acerbity, entrepreneurship post-independence started to transform itself into a new shape. Lack of support from political parties, not so favourable laws, rigid policies, and lack of research initiatives hindered the growth of entrepreneurship during that era.

But then it was in mid-80s when the Prime Minister Rajeev Gandhi declared ‘Liberalization of Computer Industry’ followed by the commencement of NASSCOM in 1988. From thereon, there was no looking back as the Indian startup’s ecosystem progressed gradually.

The next few decades witnessed a significant growth in the entrepreneurial ventures across the economic and social sectors. The changing political and economic environment drove momentum towards entrepreneurship especially the last decade witnessed noteworthy improvement in the quality of startups in India. Institutions have started to take business and academic interest in startups. In the last few years, they have exhibited potential and proficiency, which has made the global investors to venture in the Indian startup ecosystem.

According to a 2017 report published by NASSCOM, more than 5000 startups got registered in the technology sector alone. And the figures include startups covering distinct sectors like Healthcare, Education Inclusion, Financial Inclusion, Clean Energy and Agriculture – where technology made a larger impact.

The Startup Boom in India

It is said, there is no wrong time to start a right thing; but then when it comes to tech startups, the time does matter. The time and era of a launch can significantly define or defy the success. In one of the research that Bill Gross carried out to study the success and failure of businesses, he concluded “The number one thing was timing. Timing accounted for 42% of the difference between success and failure.”  A few of the startup success examples of timings are well discussed in this video. And if we look at the timings of Indian startups, they emerged just when the data packs got affordable and speedier. Most of the startups were tech-focused as NASSCOM reports “…in 2015, every year more than 800 tech startups are being set up in India. By 2020, a projected 11,500 tech-startups are going to emerge and will employ around 250,000 people.”

Image Source: Inc42.com

The dotcom era in India saw the day of light in1995. This was when VSNL started its first commercial Internet service. It was this time when Indians (though in small numbers) were exposed to phenomena called ‘World Wide Web’. Then Zoho entered in 1996, started under the name of AdventNet as a Network Management company and it boosted the IT economy that was operating at a grass-root level. It stayed true to being a lean startup and consistent even after 20 years since its inception.

The time was an asset, and so gradually the companies explored market till mid-2000. But come 2007-2008 and India witnessed two its biggest ventures rising up. Flipkart marked its entry in 2007 as a first eCommerce startup and later in 2008, Zomato and Quikr came in to the picture. These startups are now over a decade old but still sailing on their first mover advantage. The economy was not ready back then, but the novelty of idea fetched them high revenues as they progressed.

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And everything followed later on, from MakeMytrip, Ola, Paytm, to Freshdesk, etc. contributed heavily to gain traction. Looking at the contribution of startups in the economy, various programs were initiated by agencies and government to boost the economy.

Years 2005-10 showed immense growth in a number of startup stories. Let’s have a look at some of the startups that have made an unmatched space across the globe. Here they are:

Freshdesk: Founded in 2010 by Girish Mathrubhootam and Shan Krishnaswamy, the venture in no time gained the attention of some of the leading VCs in India. Being formerly started in a small room, today it has space at one of the swankiest lanes of Chennai, IT Highway.

Zoho: Sridhar Vembu founded Zoho Corporation, and despite being a co-founder of the Zoho office suite lately, he is largely known and recognized for building the multi-million dollar Zoho Corporation from scratch. Needless to say, Zoho is competing flawlessly with tech giants like Oracle, Microsoft, and Google etc.

PolicyBazaar: Completing a decade of success, the team PolicyBazaar recently organized an event named ‘UnBeat10’ to celebrate their success with previous and current employees. Also, the company announced that it’ll be generating 2500 more jobs in the FY 2019 and has shown 100% YoY growth. Well, that’s staggering!!

Flipkart: Another startup to complete a decade this year, Flipkart needs no distinct introduction. The Indian eCommerce giant got recently acquired by Walmart for $16 billion. Being started by Sachin and Binny Bansal in the year 2007, the company showed remarkable growth by delivering 3,400 products successfully.

Zomato: Started in 2008, the restaurant search and discovery app have in and out information of more than one million restaurants located in 23 countries across the globe. Though initially, it started under the name of Foodiebay.com, within just two years, it didn’t just transform its name but the entire online world of foodies.

The startup ecosystem in India witnessed the surge in 2015 with over 600 companies acquired funding; fetching over US$ 2bn from by PE and VC funds. Few of the big deals include Warburg Pincus’ that invested in Ecom Express, while Rocket Internet AG and Goldman Sacs drove big investments in Foodpanda. The Tiger Global and SAIF Partners’ investment in Little Internet can’t be neglected as well.

Barring the US$ 2bn start-up space deals, the tech space also experienced big funding in 2015 that saw US$ 700mn in Flipkart by Sequoia Capital & Steadview Capital, US$ 500mn in Snapdeal by Alibaba, Softbank & others, and over US$ 1100mn in Olacabs by a group of investors including Tiger Global, Softbank, DST Global, etc.

Funding acquired by Indian startups over a period of time
Image Source: economictimes.indiatimes.com

Another fairly huge investment took place with Quikr, Grofers, Jabong, Shopclue , Pepperfry and Oyorooms. The cumulative funding for all crosses US$ 100mn mark. Investment momentum took off after 2012 in startups, witnessing an increase in investment values at a CAGR of more than 75% between 2011 and 2015 while investment volumes have increased at a CAGR of over 80% in the same period.

Collective Efforts by Government and Agencies to boost startups

While on one hand supportive ecosystem and agencies like NASSCOM, CII, TIE, with others played a crucial role, on the other hand, micro level ecosystem players, incubators, friendly startup policies, government’s motivation, and others commendably added the blend.

Roll back to 2013 where the National Association of Software and Services Companies (NASSCOM) kicked off its ‘10,000 Startups’ initiative. The aim was to aid the growth of 10,000 startups in the country over the next 10 years. The objective was to foster the startup ecosystem, build entrepreneurial capabilities and bring in considerable value and change in the tech startup ecosystem. All this was made under the F.A.M.E. model:

  • Funding:The shortlisted startups were given assistance from the NASSCOM. 10,000 Startups were selected under this programme where NASSCOM helped them raise money from a wide range of investors. This includes procuring funding angels, VCs, micro VCs, and Government funds.
  • Acceleration:Once shortlisted under this program, these startups begin working with the top accelerators. This NASSCOM 10,000 Startups programme offers exceptional prospects and an ideal way towards working all the way up to top accelerators.
  • Mentoring: Another important aspect of here is to avail the focused group workshops specially designed for the shortlisted companies. The workshops were conducted on Product Management, Go-to-Market Strategy, Pitching and Industry Insights from the experts.
  • Enterprise Connect:Here’s when the selected startups will get the opportunity to display and explain their offerings in front of the top executives across industries. The idea is to let these set of startup explore strategic alliances, partnerships,  M&As
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Speak of spreading the reach and you won’t find CII missing out on its contributions anywhere. Recently, it endeavoured to promote startups in Jammu and Kashmir. Confederation of Indian Industry (CII) successfully planned and conducted the first startup clinic at Islamic University of Science and Technology, Awantipora.

This purpose of this startup clinic initiative is to explore new opportunities. The sessions were conducted previously this year by Iqram Shafiee, cochairman CII panel. This involved giving important insights to students on business, exploring business opportunities and possibilities, and the legal requirements for starting a new business with practicalities. This effort itself speaks volume of startup culture proliferation and its gradual adoption in India.

Government’s initiatives related to startup is also a big boost for budding entrepreneurs. One such initiative is Startup India:

Standup India:

Perhaps, the Indian Startup Evolution experienced something that was so specific to their business with Prime Minister’s aim to build systems for enabling ease of business for startups.

In August 2015, Narendra Modi announced the “Standup India” campaign to aid startups in getting the bank funding and thereby encouraging young Indians to take up the entrepreneurial route. It is important to note that he also urged all the 1.25 lakh bank branches across India to fund at least one startup especially founded by tribal and Dalit individuals.

Standup India: Another bold event saw in January 2016 saw Union Cabinet approving the Standup India campaign aimed towards promoting entrepreneurship among women and scheduled castes and tribes. Few of the scheme highlights are:

  • Providing loans for greenfield projects in the non-farm sector
  • One bank branch facilitating at least one such projects

Another significant move towards springing the startup economy includes schemes like Make in India and Digital India.

Emergence of Co-working space

91Springboard is considered as one of the oldest co-working spaces in India that started in 2012. The primary idea was to fund and connect rising businesses with mentors and investors. Over a period of time, it emerged as a heterogeneous working space for budding entrepreneurs.

The startup evolution is nothing short of any revolution since a single space, 91Springboard has over 4,000 companies at its centres. This includes startups like The Laundry Basket, and even the large companies like Glocal HR Solutions, Lucideus Technologies, and Bedouin Systems.

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a report published by CBRE Group suggests that the segment of co-working space in India may well touch around 10 million sq ft by 2020. Last year, India witnessed the absorption of 1.5 million sq ft of co-working space. This pushed the leasing activities as well. The number of shared office operators tripled, and even more, over the course of the last three years reaching the figures of 0.7+ million sq ft.

According to a recent JLL study, what drives co-working spaces in India are —cost, infrastructure and networking opportunities. India’s top cities for co-working space are Delhi National Capital Region (NCR), Mumbai, Bangalore and Pune where the penetration of startup is relatively higher than the other cities. Opting for co-working space assures cost savings, a rewarding 20–25%, especially against leasing a traditional office floor.

Startups are constantly on a hunt for a working space gets office spaces like business centers, co-working space, incubation space, and virtual offices. The networking opportunity is a big plus where they can collaborate with freelancers and consultants to get them onboard.

A typical co-working space is just an open floor that has dedicated places for meetings, collaborations, and networking. The occupancy level at such places shows how much of an in-demand thing it is. Most of these co-working spaces are occupied under a single roof and has about 85% of healthy occupancy levels.

The start-up ecosphere is blooming at its best in India, barring the occasional deeps; the global players too are attracted to the co-working idea. This helps lean Startups of today’s age to cut down on massive operational costs which include renting or owning exclusive spaces and designing and equipment costs. This in turn works in their favor, allowing startups to invest the ‘opportunity’ funds in a more pressing requirement that can drive great results.

 The road ahead…

From a trading dominated nation to a co-working space with full of ideas and executions by millennials, there is a long for Indian startups to go. Though the arena has evolved and transformed drastically since its inception and startups expanding the horizon with an innovative approach, the suitability is still an issue. A quick look at the study of “Entrepreneurial India” by the IBM Institute for Business Value and Oxford Economics will get you to the ground reality. It is observed that 90% of Indian startups fail within the first five years. Tracing the reason revealed that the lack of innovation and new technologies contribute to the failure. But with time, this too shall evolve to an extent wherein the new startups entering the battlefield shall change the face of Indian startup ecosystem to leverage numerous benefits and eventually attain impeccable benchmarks.

There’s just one thing you need to keep in mind. Be passionate and never restrict your imagination. Your investors and customers are looking for some change, something that can blow their heads off.

Source: IndianWeb2

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