That time of the year again – introspecting 2016 and crystal ball gazing 2017


Will try and project into 2017 using the years 2014 and 2015 (clubbed together), and 2016, as the lens. These years constitute a 'period', if you will (the time for one complete cycle of a pendulum -- a left swing and a right swing -- is called a period).

With Yogi Berra’s caveat, “It's tough to make predictions, especially about the future,” let us dive in.

Funding related

  • Deal volume declined significantly in 2016 -- $4.01B in funds till mid-December, down from $7.55 B in 2015. The deal pace (numbers) remained largely steady -- 996 deals in 2016 vs. 1,027 last year. Essentially, companies that “deserve” funding continued to get it but the 2014/15 trend of mega and frequent rounds declined. Given most funds have significant dry powder, and a few got added to the mix, I expect this to continue into 2017.
  • It is taking longer for entrepreneurs to get money into the bank – 2x, at least, from what I gather. Series B/subsequent round investors are asking more questions, delving deeper into myriad aspects of the business etc. This is unlikely to change during 2017.
  • 2014/15 was characterised by a surfeit of B2C funding. Words/phrases like landgrab, first-mover-advantage, Uber-for-X, hyper-local, home services, and foodtech either disappeared from the lexicon or became untouchables in 2016. This year (and the coming year), is witnessing a return of B2B. We hear this from active investors in this country -- a radical change for them. Good tidings for the long-neglected B2B entrepreneurs.


  • Marketplaces (largely B2C, some B2B) will continue to see investment in 2017. The underlying fragmentation of supply, a result of our socialist past, remains “the” key driver.
  • It amazes me that VCs continue to invest in marketplace segments where leaders are more or less identified – despite the winner-take-all nature of marketplaces.
  • Media’s obsession with unicorns will continue to recede. The next 50 (soonicorns!) will gain prominence.
  • Given the correction in the US fintech, expect realism to dawn on the latest-craze-of-the-month/year in India, as well. That said, our fintech investments (PolicyBazaar & FundsIndia) are shaping up admirably.
  • We continue to see quality teams, with reasonable traction, in segments like IoT, defence technology, and content.
  • That said, given Inventus’ outlook/early-stage investing nature, we continue to employ the entrepreneur-first-segment-second approach.


In 2016, VCs/entrepreneurs readjusted their expectations of the Indian market. 'India is the next China' started giving way to 'Wants vs. Needs', 'India 1 vs. India 2' and the like. Assumptions on 'size of the market' saw a correction and respect for capital made a return. These will likely lead to/see a continuation of the following sub-trends:

  • Expect to see more of the MakeMyTrip and ibibo type consolidations.
  • Online companies evolving to hybrid (with offline component) models. For some of us, this is déjà vu from the go-go years of 1999/2000.
  • The on-the-margin entrepreneurs from 2014/15 saw the downs in 2016. The 2017 entrepreneurs, I believe, will do it for the right reasons -- contrarians make the best entrepreneurs.
  • Collateral impact of the 2014/15 madness -- reneged campus recruitments, for example, will impact “startup attractiveness” in not just campus but lateral hiring in Series A/B companies, as well.
  • 'Capital dumping' got added to the startup vocabulary in the last month of 2016. I hope the entrepreneurs involved see the irony of it all – many entrepreneurs competing with them would argue they took away their oxygen in 2014/15. Those, and other, case studies will play out – it would be foolhardy for me to predict the end game there as I have a cheap seat in a large theatre.
  • Tech acquisitions/IPOs are the need of the hour for the ecosystem. Chinese operating companies getting active in India, to point to just one trend, bodes well. Cross-border M&A, a bit like fundraising for us VCs, tends to be cyclical, though.

Recent developments

The demonetisation tsunami, and the upcoming GST impact will play out in 2017. The impact of the first shock is unfolding yet -- even six weeks after the event it is unclear how long the stabilisation process will take. Thankfully, from what I gather, we are better prepared for GST – may even be postponed somewhat.

One medium/long term benefit of demonetisation would be the likely easing of friction in payments. Over-investment in logistics in 2014/15, and some quality entrepreneurs there, has also meant significant easing in the other Achilles Heel of Indian e-commerce. Ache din? 

Other changes in the payments related ecosystem – UPI, India Stack -- should further reduce payments/other operational hassles. While I believe, the benefits have been somewhat oversold, the long-term advantages of a sound foundation (Aadhaar!) must be good for us. In any event, I see these primarily as enablers for our portfolio companies rather than something that leads to many new investment opportunities.

As you can probably make out, many of the points highlighted above are hopes, as distinct from predictions. Irrespective, the startup ecosystem in India continues to mature, as do the people involved (largely so, at least). The secular upward trend continues, after “the best of times and the worst of times” in the past three years.

Here’s wishing everyone involved in the vibrant Indian startup ecosystem a Happy & Productive 2017.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)