India’s start-up revolution has taken everybody by storm. 2010–2015 saw a massive amount of capital coming in, uberification of all kind of services happening, every other college dude was running a startup and help poured in from the government as well. Many startups were shot to fame but a few survived. There was a flood in the food-tech and e-commerce segments, companies with similar business models and high operations costs.
Venture capital was pouring down on start-ups in India. Getting funding was a prime goal and it was not too difficult to achieve it. New companies were opening in every nook and corner and a huge number of young people were leaving their boring 9–5 jobs.
And it came all crashing down by last quarter of 2015 and throughout 2016. According to this report, one funded tech startup was shut down every ten days in 2016. Capital flows became slow, some VCs pulled out from India and came a time where the Minimum Viable Products weren’t enough to see you through a funding round.
Getting funded has become difficult and it is a good thing
2016 wasn’t the best year for Indian startups for funding. The number and value of capital invested have come down. The Angels and VCs have become more selective. They seek for a viable business model and for good product/services.
Manish Singhal, from pi Ventures, said on this: “That is the best thing to happen to the Indian startup ecosystem. Before this drawback, quite a few of unviable business model-based startups raised money. With this drawback, a lot of these companies have closed down or have pivoted to something else. At the same time, the same corpus of money is now available for IP-based product startups, which is heartening to see.”
Now that the bar has been raised, founders are focusing more on improving their products. Most of the start-ups are high leveraging the power of data and technology. Hence, increasing the overall value provided by the company. The scarcity of capital makes your ideas more innovative as you have to do more in less. Also, it does make you think about revenue generation, which is sometimes left behind in the flux of venture capital.
I do the samein my company. We are generating insights from KPIs and improving the product every day. If your product is great and you have a good distribution structure in place, it will market itself. And it doesn’t take long for great products to get funded.
You can learn a lot from failure
You can learn always from those who came before you and succeeded, but you can learn a lot more from those who failed. Start-ups from many market segments shut down in 2016. A big chunk of them came from hyper-local services and food-tech market. Most of it is owed to high costs associated with delivery and the unit economics just didn’t make sense in the long run. PepperTap and Tiny-owl are most notable of them all.
There is a great learning in their story. They risked and ventured in different segments, some things didn’t work out and eventually ran out of money. If you are a trying to build a product, do an extensive research on those who failed in the same segment. You can avoid the same mistakes and save time.
Rise of technology and data
There is a rise of tech start-ups in India. It is good to see many founders are using the potential of technology. The rat race of uberification of everything is over. The world doesn’t need startups selling pillows or on-demand laundry. These pain points can be embedded into bigger systems, where they are just one part of similar services provided by the company. Interesting companies are starting on the lines of IoT, AI, Machine Learning and Big Data.
Here is a NASSCOM report on the rise of tech startups in India. I am not taking anything away from traditional business models. The point is you can improve highly by leveraging technology and data. There is so much that data can tell you. If not data-driven, you at least should be data informed.
Support from the government and open markets
India ranks way down on ease of doing business. Yet in recent years, the Indian government has taken several initiatives to support and nurture start-ups. As more options for FDI are lining up every day and with high economic growth rate, the markets are going to be more favourable for start-ups and ease of doing business index is going to rise up.
But make no mistake, there is a lot more to be done in this regard. We are far behind the USA, Germany, and Israel on this. But a start is a start. There is only one way forward from here.
2017 didn’t start with all sunshine for Indian startups. Valuation of Indian unicorns was slashed constantly and the trend is continuing. A lot of change in top management happened in most of them. A lot of startups slashed their team in huge numbers. Most notable of them being Snapdeal, where approx. 600 people were fired and founders took 100% pay cut as they were burning millions of dollars in salaries per month.
There were some controversies erupted when StayZilla’s founder was arrested on the charges of fraud. The story is still unfolding and getting more complex. These are tough times for Indian start-ups. But as a matter of fact, when are the times easy for start-ups. As our beloved Uncle Ben famously said: “With great power comes great responsibility”.
So this is the best time for creating your product in India. And it is the worst. If you come out of it successfully, you will be stronger than ever. As they say, smooth seas never make a good sailor. If you don’t leverage the opportunities available right now, then you might be one of those 9 startups out of 10 who fail. India has a long way to go and despite all the flaws we have created some truly inspirational start-ups. We will continue doing so.