‘India’s GDP to contract 45% in June quarter 2020’ (Q2 of FY 2021): Goldman Sachs
This headline was splashed across the media recently. While there is no doubt that it is a tough time for India Inc. it’s also a period of great opportunity. Companies and businesses that are nimble on their feet can create great value for both customers and shareholders during these unprecedented times. While established companies might take time to come to terms with a new normal, it’s the perfect opportunity for startups to solve core problems.
The Indian startup ecosystem is perfectly placed to mould and groom the next round of big companies in India. With the right guidance from accelerators and incubators, there is no reason why the next 10 Unicorns in India can’t be born out of this crisis.
There are a lot of things in India’s favour. India is the third-largest startup market in the world. Startups in the country raised $14.5 billion in 2019, beating investments of $10.6 billion in 2018, says research firm Tracxn. In 2019, Indian VC funding was 9.3X lower than investment in the US. This is a marked improvement from the 12.2X gap that existed in 2018.
With a pretty decent startup ecosystem in place, it is surprising that India has produced only 36 Unicorns till date.
While it is easy to say that recessions are the best time to start a new business, execution in the real world is very different from an Excel sheet that has your business plan. Things will get worse before they get better. But that is where the true character of a startup and its founders is put to the test. Startups that endured recessions have come out stronger and bigger.
To give some context, look at a few Unicorns that emerged from the 2008 global financial crisis: Uber, Airbnb, Slack and Pinterest. Closer to home, Flipkart, India’s most famous Unicorn, was founded in October 2007 and had to pass through a trial by fire between 2008 and 2010 before it became the behemoth it is today.
If India wants to add to its tally of Unicorns, it has to ensure that it has incubators and accelerators that fuel the startup ecosystem. Accelerators play a very important role in helping a startup scale up. Often, accelerators focus on one or two industries, and that gives startup founders access to key industry experts and advisors who are willing to invest time with them. Startups interact with peers in the accelerator program and learn about challenges unique to the region or the industry. They don’t have to reinvent the wheel or make similar mistakes.
Enter Venture Catalysts (VCats), one of India’s first largest integrated incubators. The firm has launched an accelerator VC called ‘9Unicorns Accelerator Fund’ (9Unicorns) that is customised for Indian startups. Founded by VCats founders-- Dr. Apoorva Ranjan Sharma, Anuj Golecha, Anil Jain and Gaurav Jain, 9Unicorns is similar to Y Combinator in the United States.
“When you don’t have enough companies that are mentored by accelerators, there are going to be multiple companies making the same mistake again and again because there is no one to guide them in the space. A lot of time and resources are wasted in reinventing the wheel. And when a pandemic hits, fatigued teams often lose the energy to push further,” says Dr Apoorva Ranjan Sharma.
Dr. Sharma should know what he’s talking about. OYO Rooms, Softbank’s darling, valued at $10 billion in April 2020, was incubated at Venture Nursery, which was founded by Dr. Sharma. He has also mentored male grooming products manufacturer Beardo.
As a founder of VCats, Dr. Sharma has incubated more than 90 startups since its inception that have raised over $168 million till date. VCats has been an early investor in startups such as Innov8, Beardo, PeeSafe and BharatPe amongst others.
To understand the potential of accelerators, take a look at the figures from Y Combinator, TechStars and SOSV:
“We want to get in on the ground floor. We work with founder’s right from the ideation stage and help them scale up. A recession is the best time for new ideas to come out and startups who succeed are forged with fire and iron. All they need is good mentorship and enough capital to take off, and that is what we are aiming to do with 9Unicorns,” says Anuj Golecha, co-founder 9Unicorns.
So how does 9Unicorns operate? It’s a $45 million sector-agnostic accelerator that takes 5-7% equity stake in every startup for $100,000. If the startup performs and meets metrics, they are eligible for a follow-up round of $500,000 to $2 million. The second round is from a syndication of the VCats network with global VC funds.
Apart from the monies, startups also receive 3 months of accelerator support and 18 months of post-incubation support. 9Unicorns startups will also get access to over 500 corporates and CXOs through VCats’ extensive network. VCats has the unique ability to provide startups with unparalleled access to India’s top corporates. This should help them generate business leads and give them a boost when they start off. These startups also have a massive networking opportunity where they get access to mentors from both the corporate world and established startups.
9Unicorns’ mission is not as simple as it is. The accelerator wants to create, mentor and help at least around 100-120 idea-stage start-ups to grow to the next level in the next three years. It will also help these early-stage entrepreneurs raise the next round of funding and with a go-to market strategy. However, the biggest agenda is to help create more successful startups in the country and 9Unicorns thinks it is on the right track. 9Unicorns’ bigger idea is to expand the start-up ecosystem by providing them with a more organised and robust infrastructure so that India witnesses more billion-dollar companies with stronger business acumen. They want to do this by implementing processes and systems that have succeeded while eliminating wasteful expenditure and time-consuming approaches.
While there is no predicting external factors and the impact they have on economic conditions, 9Unicorns wants to raise their portfolio companies in a way that they survive the toughest situations too. An invisible virus has thrown the whole world out of gear, but this is also the time we would see some interesting business ideas emerging.
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