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The great Indian startup story in 2015

Athira Nair
29th Dec 2015
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Startups were on a rollercoaster ride this year –the highs arguably beat the lows. Headline makers this year included everyone from bootstrapped startups to investments from giants like Alibaba and Infosys. Yet, at the threshold of 2016, startups are looking at the future with some amount of scepticism. The ups and downs of the game boosted some sectors, just as it ruined others.

YourStory looks at some of the biggest news in the startup world this past year.

Money Matters

Unsurprisingly, it was Sequoia Capital India that made the highest number of investments this year as well – 32 – closely followed by Tiger Global Investments with 29. But the surprises came from Infosys and titans like Ratan Tata, NR Narayana Murthy, and Kunal Bahl, among others, who became angel investors for numerous startups.

Very soon, China’s biggest e-commerce company Alibaba also entered India – not just with an investment in Paytm, but also in a mobile and commerce-focused incubator in Bangalore. Another Chinese electronics giant Xiaomi followed suit, announcing its plans to set up e-commerce warehouses and logistics, and to invest in startups in India.

Year-End-V2
Graphics by Gokul K

Taxi Revolution

Despite government bans and protests by taxi unions [in Mumbai and Kerala] private car aggregators continued to ply throughout the year. Both Ola and Uber faced protests from drivers who alleged that their incentives were being brought down too often. However, both went ahead with expansion, and so did other players like Meru and Jugnoo. In fact, now that India has become the second-largest geographic market for American taxi aggregator Uber, it has declared its plans to pour in $1 billion into Indian startups.

As per the authorities’ mandate, Ola converted its entire Delhi fleet to CNG by the third quarter of 2015; however, they still had to fight in court to get a licence to operate in the capital city. Major relief came their way with clear legislation from the government that defined their services and provided strict parameters. The Ministry of Road Transport and Highways, in October, provided the ‘Advisory for Licensing, Compliance and Liability of On-demand Information Technology-based Transportation platforms’, which clearly distinguished technology-based aggregators and taxi companies. It mandated police verification on criminal background of drivers, and strictly stated that the aggregators shall not own any vehicles, employ any drivers, or present itself as a taxi service.

The Capital city sprung a pleasant surprise recently when the odd-even rule was announced. It mandated that odd-numbered cars should be used only on odd numbered dates, in an effort to reduce air pollution. This meant a field day for the aggregators who all recently launched carpooling services. Uber, Ola, Meru and bus shuttle service Zipgo have all taken the plunge preparing for this mandate, which is set to be introduced in January as an experiment.

State Policies

Seeing the impressive growth of the startup ecosystem, the government also came up with lenient policies this year. In July, the Union Cabinet allowed foreign entities to invest in Alternative Investment Funds (AIFs), which will make more funds available to startups, early stage ventures, and small and medium enterprises (SMEs). Foreign investors are also allowed to invest in the AIFs.

Furthermore, the Securities and Exchange Board of India (SEBI) – the regulatory agency for the securities market in the country – said that it is open to any changes if there is reasonable need. With a panel on regulatory framework for startups headed by Narayana Murthy of Infosys, it made raising funds easier for startups through relaxed domestic exchange norms. It also went on to distribute the funds from IPO irregularities to investors.

However, the best news from the State came when it decided to treat non-repatriable funds from non-residential Indians (NRIs) as domestic money, effectively saving it from foreign direct investment (FDI) norms. Yet, this was not a happy ending to the FDI story. A month ago, the Delhi High Court ordered the government to investigate 21 e-commerce websites for violation of FDI norms. But the irony was that a handful of these 21 were not funded by FDI. The lack of clarity on FDI in e-commerce has restricted quite a few startups from looking for foreign funds.

International Forays

A few startups dared to venture into foreign waters this year. Backpacker hostel chain Zostel went to Vietnam, and hotel booking app RoomsTonite – having raised $1.5 million – has plans to enter Dubai. Online ticketing platform RedBus – which has had more than $8 million in funding – looked towards South East Asia, and is now serving in Malaysia and Singapore. Jugnoo is heading to the Philippines as well.

Ola made news internationally when it tied up with Didi Kuaidi, GrabTaxi and Lyft in an alliance against US-based giant Uber, which has its second-largest market in India outside its home country. Collectively, the four companies have raised $7 billion. Didi Kuaidi, in fact, has invested in Ola, GrabTaxi, and Lyft. Didi Kuaidi operates in 360 cities in China; Lyft in nearly 200 cities in the US, and GrabTaxi across Malaysia, Singapore, Indonesia, the Philippines, Vietnam, and Thailand. Through this alliance, international travellers can access local rides in these countries using the same app they use at home. Uber has definitely got a major rival in this alliance, since the four can now exploit each other’s local market knowledge and resources – starting from the first quarter of 2016.

More Unicorns, Less Foodies

Paytm, Zomato and Quikr joined Ola, Flipkart, Snapdeal, Inmobi and Mu Sigma in the unicorn club this year. In fact, Zomato stayed in the news throughout the year with its acquisition of Urban Spoon to enter the US market, the launch of a separate app for food delivery, and the mass firing of about 300 employees in November. Zomato also partnered with travel planner TripHobo allowing the latter’s users to access deals on restaurants through Zomato.

Curiously, Zomato managed to stay afloat in a year when many food-tech startups starved to death. Spoonjoy, Eatlo and Dazo shut down due to low funding, while TinyOwl fired about 200 employees and shut down its offices in some cities.

The power of unicorns was visible again when Flipkart’s Sachin Bansal and Binny Bansal were featured in Forbes’ Billionaire list. Snapdeal went on to invest $1 billion in startups – including FreeCharge. Interestingly, Flipkart, Ola, and Amazon joined the hyperlocal grocery delivery race with Peppertap, Grofers, and Jugnoo.

E-commerce Advances

E-commerce biggies stayed in the news throughout the year, what with their acquisitions, app-only strategies, funding in the millions, and festive season sale numbers. Unicorn Paytm made waves when it entered the online shopping space, as did Flipkart and Snapdeal, when they launched their respective “lite” mobile sites.

Although Diwali 2015 did not see as many discounts and offers from e-marketplaces as it did in previous years, sellers had a field day. Advancements in logistics and supply chain brought about bigger numbers for these players – with about 60 per cent of its orders coming in from Tier II and Tier III cities, sales numbers were twice and thrice as much compared with previous years.

Picture Abhi Baaki Hai

The ‘Startup India Standup India’ campaign is set to be unveiled in January 2016. But at the end of a happening year, there are many questions left unanswered in the startup world: Grofers and OYO Rooms have joined the $100 million club… will they be the next unicorns? Snapdeal and Quikr have gone multilingual… so is vernacular the next hyperlocal? Infosys has invested in six startups, only one of them Indian…will that trend continue? Or would Indian startups be able to capture their attention? Uber is all set to invest $50 million in Hyderabad to set up its biggest global office. Will higher competition bring about better transport facilities? Only time will tell.

 

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