“Hindustan mein koi aisa zila na ho,
Aisa block na ho, jahan koi startup na shuru ho.
Start up, India, Stand up, India.”
When the Prime Minister of a country raises a clarion call for such an action, it is time to sit up and take notice. In just a few days (January 16), the blueprint for the ‘Start-up India, Stand-up India’ initiative will be rolled out to make it easy to do business in India.
The New Year brings with it hopes of making these times a “decade of entrepreneurs” in the country. Adding to the enthusiastic atmosphere prevailing in India, Infosys Co-founder and investor N R Narayana Murthy reportedly said recently,
“I think all the stars are in place for entrepreneurs, and therefore this is going to be the decade of entrepreneurs.”
According to the World Bank’s latest Global Economic Prospect report, which is released every six months, India will continue to be the bright spot of the global economy and is projected to grow at a robust 7.8 percent in fiscal 2016-17, more than a percentage point higher than China’s.
With such a good forecast for the New Year, it is no wonder that the startup ecosystem is buoyant at the moment. In fact, according to a YourStory research report, in 2015, investors had pumped $9 billion into Indian startups. That’s 50 percent of the past five years’ total deal value. Clearly, the trampoline is out in the playground.
But donning the devil’s-advocate cape for a second here, let’s not forget there’s a long walk (perhaps a long queue) yet to that trampoline.
We are constantly reminded that some of the Indian startup Unicorns cannot be called Indian because they are registered in Singapore or the US. Well, that happens because on the global index of ease of doing business, India ranks 142 compared to Singapore’s number one position.
In a recent survey by YourStory that asked entrepreneurs what they wanted from the ‘Start-up India, Stand-up’ initiative (YourStory is a partner), it didn’t come as a surprise that the biggest concern that startups have is making regulatory compliance norms easier. The second was the relaxation of existing tax laws. The levy of taxes by both the central and state governments is hampering the ease of doing business for startups. Another important concern was access and support to funding, as well as resource constraints like lack of incubation spaces, mentorship and so on.
With 2015 being a mixed bag for startups with some hits and some misses, we did our own crystal ball-gazing, if you will, to predict what the Indian startup ecosystem can expect this year. Here’s what some ‘pundits’ of the ecosystem predicted.
Govt thrust will be good for ecosystem health
A big supporter of the Indian startup space, veteran investor and mentor T V Mohandas Pai believes that by 2025, Indian startups will emerge as major job creators. Talking to YourStory, he says as of now India has 18,000 startups with a total valuation of $75 billion, employing 3.5 lakh people. “By 2025, there will be one lakh startups valued at $500 billion, employing three-and-a-half million people,” he adds.Elaborating on his wish list for the New Year, Mohandas Pai says that “36 hygiene items” have been put forward to the government that involve regulations regarding starting a company, like easing procedures and so on.
“We have also suggested establishing 500 incubators in colleges and universities,” Mohandas Pai says.
Another important suggestion has been tax incentives for startups for the first five years. According to Mohandas Pai, the demand for a five-year exemption is not because the ecosystem wants any sops, but because startups can concentrate on building a business and revenue without worrying about different taxes when they are not making money.
“We have been suggesting to the government to encourage the idea of city incubations,” says Prof. Anil K Gupta, Founder of Honey Bee Network and Executive Vice-Chair at the National Innovation Foundation. He adds, “We need to provide in-city incubations to the young innovators so that they stay rooted to their families and not move to the metros and big cities. It doesn’t make sense for any country to have young people move from their small towns to larger cities while the old people stay back.”
Going lean will be sexy
Startups have begun realising the importance of following a lean model. Anand Lunia, Founder of IndiaQuotient, feels startups are beginning to have serious conversations on the importance of hiring the right teams and having better employee revenue.“That's what makes a great technology company -- a lean model with better employee satisfaction and revenue,” adds Anand.
Aprameya Radhakrishna, Co-founder of TaxiForSure and Angel Investor, adds that the lean model will be the way forward. “There might be a slowdown in the pace of investments, but they would be fundamentally more sane and more correct. The lean model is going to be strong. There will be a lot of startups building products for the masses like adapting local languages. Products for wider India will start happening,” he predicts.
Innovations for mass impact will lead to success
“People need to leverage digital to make use of it in the right way,” says Ankita Vashishta, Founder of Saha Fund. She says she is looking for more innovations this year that will impact rural India. “While there will be big deals happening, I see that the funding for Series B and C will be slower. Investors now are going to be more focussed on unit economics. Companies will be going global, but at the same time expect them to focus on the Indian ecosystem as well.”Sahil Kini, Principal at Aspada Investments, adds, “Native languages are going to be big in 2016. The numbers are on their side. We will see more adaptability to local and vernacular languages.”
Consolidations and saner funding will be good for peace of mind
Managing Partner of Prime Venture Partners Amit Somani hopes to see more consolidations in terms of acqui-hires, pivots, and quality teams getting absorbed, pivoting or starting afresh. “B2B should come back with a vengeance. It has been under the radar and it has slightly better economics. There will be more mobile and 100-percent digital play that will be new and unheard of. This will be because of the increased smartphone penetration. Indian apps will now see a more critical mass and deeper growth,” is his prediction for the future.Adds entrepreneur and author of The Golden Tap: The Inside Story of Hyper Funded Indian Startups, Kashyap Deorah, “India will continue to be an interesting global destination for several e-commerce related investments. But the money will be smarter, investors will begin to focus on getting exits and the investments will be more measured. There will be startups that are focussed on innovations and the successful ones will emerge strong. There will be more focus on thinking for ourselves rather than on focussing on borrowed beliefs."
For Sumer Juneja, Principal, Norwest Venture Partners, 2016 promises to be a great year.
“It is just the beginning and we will see a lot of startups raising funds. The toughness will be in the Series C rounds onwards where people will look for unit economics and proven models.”
A word of caution
Despite a thriving startup ecosystem in the country, Mohandas Pai believes that only 10 percent of the new-age companies would be successful while a majority of these would fail. Thus, only those entrepreneurs who have the tenacity, long-term vision, and drive to lead teams will emerge winners. But if the emergence of startup culture has taught us anything, it is not to fear failure. So if you fall, dust off the dirt and walk again.As Kashyap Deorah says, “In 2016, there will be more intelligent growth of funding and the men will be separated from the boys.”
(with inputs from Sindhu Kashyap; Graphics by Gokul K)