Ag4zzlb1-IndianStartupEcosystem June-2018 Vol 1

11/3/2018 Startup Barometer: ET India Startup Barometer 2018, Technology News, ETtech
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Startups » 
Startup Barometer Startup Unicorns Startup India Indian startup ecosystem Entrepreneurship
ET
 India
 Startup Barometer 2018
ETtech
India’s
August 17, startup
2018, 10:27ecosystem is looking at the start of another boom cycle with
investors opening their purses again, although the present exuberance is
IST
expected to be more tempered than during the highs of 2014-15.
I
ndia’s startup ecosystem is looking at the start of another
boom cycle with investors opening their purses again,
although the present exuberance is expected to be more
tempered than during the highs of 2014-15.
A survey of 75 highly influential founders and investors by ET as

a part of its annual Startup Ecosystem Barometer found
entrepreneurs more optimistic about their prospects.
More than half of the founders expect revenues or gross sales to

double in the next 12 months, and about 90% of the investors
surveyed said they will increase their investments over the next
12 months.
Much of the capital flowing in, however, is from Chinese

investors. Also, the funds are mostly directed at select
companies, with investors displaying a preference for deploying
higher amounts of capital in winners than for backing multiple
https://tech.economictimes.indiatimes.com/news/startups/et-india-startup-barometer-2018/65434582 1/10
players in a category.
 Startups Technology“The uptick (craziness,

Corporate Mobile arguably)
Internetis largely
Peoplerestricted
Brandto the top
Solutions
50 startups in the country. There is a sheer cli a er that where
getting funded continues to be a tall order,” said an investor who
participated in the survey.
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Investors and entrepreneurs are also realising they need to try a
new formula—back startups targeting the next 200-300 million
internet users, where di erent monetisation models need to be
built.
  Also interestingly, a majority of the founders and investors

surveyed said they expect companies founded by local
  entrepreneurs to triumph over foreign giants—a big shi from
two years ago.
  At the same time, a majority of the respondents said

government initiatives such as Startup India have not been a
ETtech significant catalyst for entrepreneurship, with 24% of the
founders surveyed saying bureaucracy hurdles remain. Also,
August 17, 2018, 10:27 about 66% of the respondents said a level playing field does not
IST exist in India for local and global companies—an issue first
raised nearly two years ago by Ola’s Bhavish Aggarwal and
Flipkart’s Sachin Bansal.
Policy Conundrum
India’s startup ecosystem is at an interesting inflection point.

While on the one hand the $16 billion acquisition of India’s most
valued startup, Flipkart, by US retailer Walmart is being
celebrated, in some corners a new question is rising.
Which companies will be India’s answer to BAT (China’s Baidu,

Alibaba and Tencent) and FANG (US-based Facebook, Amazon,
Netflix and Google) that rule their respective ecosystems? None
of the most valued Indian internet companies is listed—all BAT
and FANG companies are—and prospects of their listing are
small.
The Indian government recently came up with a slew of

measures under its dra ecommerce policy and the Srikrishna
Committee report on privacy. The measures favour local
companies in areas like data localisation and voting rights for
founders.
An

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 
 
 
ETtech
overwhelming majority of the investors and founders surveyed—
August 17, 2018, 10:27 66%—said a level playing field does not exist in India for
IST domestic and foreign internet companies. But while only a small
minority said foreign companies like Amazon and Uber should
not be allowed in India, 56% said steps need to be taken to give
both sides equal footing.
On the government’s various schemes for startups, about 60% of

the respondents said Startup India and other policy initiatives
have not had a significant impact on entrepreneurship.
Only 16% said the government’s policies had made a di erence,

with several of them saying the initiatives had helped improve
sentiment about the startup community and encourage more
people to try something new. Several founders said initiatives
such as GST had helped them more than policies specifically
targeted at startups.
The China angle
Chinese investors have emerged as a major driving force on

India’s startup ecosystem. This began with Alibaba and its
a iliate Ant Financial investing in Paytm in early 2015, and
picked up in 2017 with Tencent acquiring stakes in Flipkart and
Ola.
Chinese
 Startups Technologyventure Corporate Mobile Internet People Brand Solutions
capital
firms like
Shunwei
Capital and
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other
Chinese
companies
are also
making
  their
presence
  felt here in
areas like
financial
  technology
and social
ETtech videos.
August 17, 2018, 10:27 This rising

IST influence of China is being perceived as both an opportunity and
a threat. It is not clear what the end game is for big Chinese
companies taking minority stakes in Indian companies.
At the same time, this presents Indian entrepreneurs an

opportunity to learn from China on how to build for scale. Some
respondents, however, worry that Chinese investors will
abandon Indian companies a er a while just as US-based hedge
funds did in 2014 and 2015.
“There is more in common between China and India. However, a

typical Indian company’s velocity to scale is likely (still) to
disappoint the more aggressive Chinese investors,” said an
investor.
Funding scenario

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 
 
 
ETtech
August 17, 2018, 10:27

IST
Mega valuations, multiple rounds of funding, and an influx of

new investors are all back in the Indian startup ecosystem.
Founders and investors are seeing this change and Walmart’s
mega acquisition of Flipkart has only given a fillip to this trend.
While 23% of the investors surveyed said valuations have gone

up significantly, 46% said valuations have increased only
marginally. A more significant increase in valuations is seen in
series B rounds and beyond, where startups are looking to raise
over $10-15 million.
More importantly, 62% of the founders surveyed said funding

prospects have improved significantly, and 9% even believe
India’s startup ecosystem is in peak territory, like in 2014-2015.
But there seems to be an element of sobriety to this funding
boom, unlike in 2014 and 2015. Respondents don’t expect the
number of new startups to shoot up like it happened previously.
“We won’t see another bubble in early stage soon,” said an

investor. Also, the ecosystem is seeing the emergence of much
 Startups Technologymore experienced
Corporate entrepreneurs
Mobile InternetthatPeople
before. Brand Solutions

In ET’s Startup Ecosystem Barometer in 2016, 35% of the
investors surveyed said they mostly gave term-sheets to
founders in the age bracket of 25-30 years. In this survey, only
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23% said they most commonly o ered term-sheets to founders
in that age bracket.
Term-sheets to founders in the age bracket of 30-40 years have

increased from 58% in 2016 to 73%, indicating that VCs are
  betting on entrepreneurs who have at least 5 years of
experience.
 
In terms of the origin of investors, even as the influx of yuan from
China increases, for founders American dollars are still the
  preferred source of funding, followed by capital from Indian VCs.
ETtech Startup fundamentals
August 17, 2018, 10:27

IST
A er two years of relative sobriety, there is a sense of animal

spirits coming back into the Indian startup ecosystem. Since
2016, startups have been spending cautiously as capital was not
flowing freely and profitability/break even became the priority
over growth.
Over 55% of the startups surveyed expect their revenues or

gross sales to double in the next 12 months. Growth is becoming
a higher priority over profitability again. But at the same time,
startups are not completely ready to go for growth at all costs, as
improving unit economics remains a priority.
While 56% of those polled said that they would expand their
employee base by over 25%, surprisingly 29% are still filling in
just key positions.
Another surprising finding was that 70% of the startups said they
have either broken even or become contribution margin
positive, which is primarily making money on each transaction.

This could be due to the sample set of companies valued at over
 Startups Technology$100 million thatMobile
Corporate ET polled.
Internet People Brand Solutions

“Unit economics have improved in spite of high growth. Higher
sales, improved gross margins, and cost e iciencies in last mile
delivery and supply chain have resulted in this improvement,”
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said one founder.
Competitive Scenario
 
 
  The debate around which company will win Indian internet’s

biggest segments remains open. While Flipkart says it is ahead of
Amazon India in terms of gross sales, the Seattle-based online
ETtech
retail giant contests this. So is the case between Ola and Uber.
August 17, 2018, 10:27

IST
Digital payments is a new battleground, pitting Paytm,
WhatsApp and Flipkart-owned PhonePe against each other.
When ET did this survey two years ago, respondents expected

Amazon India and Uber to emerge as the market leaders in their
respective categories. Flipkart and Ola have proven that wrong.
This time, 57% of the respondents said Ola, Paytm and Flipkart
would emerge as the winners.
Some respondents said while market share dynamics would

keep going up and down what matters is which company is able
to build businesses and return capital.
“Flipkart has already delivered a multi-bagger exit, as will Ola

and Paytm,” said a founder.
Unicorn Corner
India’s Unicorn Club is poised to

double to about 20 members this
year. The new Unicorns are from
sectors such as so ware, logistics,
hospitality and financial
technology, diversifying the pool from primarily online retail and

advertisement-based models.
Companies that have entered this club in 2018 include food-
delivery application Swiggy, online financial services provider
Policybazaar, online education services company Byju’s, and
online-to-o line retailer Paytm Mall.
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But even as this club expands, there are questions on whether
the older members will remain in it and how many will be able
to build lasting enterprises by going for an IPO.
  “Honestly, there are more strugglers than shooting stars in the

here-and-now list. That said, some of the new ones are, in my
  honest opinion, better positioned,” said an investor.
Methodology
 
ET designed two di erent questionnaires for the survey—one
ETtech targeting entrepreneurs and the other, investors.
August 17, 2018, 10:27

Respondents were given multiple-choice answers to pick from
IST but also had the option to elaborate on their choice. Some
questions were common to both—like on level playing field and
the influence of Chinese investors on the Indian startup
ecosystem.
The survey was distributed to about 120 founders and investors.

They were chosen carefully—founders of companies worth at
least $100 million, serial entrepreneurs, and managing directors
of venture capital firms. They were allowed to respond
anonymously. Of the 120 people ET reached out to for the
survey, 49 founders and 26 investors participated.
The survey was led by ET's Madhav Chanchani. Inputs From -

Biswarup Gooptu, Mugdha Variyar, J Vignesh, Supraja Srinivasan,
Varsha Bansal & Pratik Bhakta. Illustrations: Anirban Bora &
Graphics: Yogeesh Mh.
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11/3/2018 Startup Barometer: ET India Startup Barometer 2018, Technology News, ETtech

 NEWS SITES  ET PRIME  Sign in/Sign up   

 Startups Technology Corporate Mobile Internet People Brand Solutions

E-commerce Digital Payments Interviews Funding Smartphones NEA 2018 Search

A survey of 75 highly influential founders and investors by ET as

More than half of the founders expect revenues or gross sales to

Much of the capital flowing in, however, is from Chinese

 Startups Technology“The uptick (craziness,

  Also interestingly, a majority of the founders and investors

  At the same time, a majority of the respondents said

India’s startup ecosystem is at an interesting inflection point.

Which companies will be India’s answer to BAT (China’s Baidu,

The Indian government recently came up with a slew of

E-commerce Digital Payments Interviews Funding Smartphones NEA 2018 Search

On the government’s various schemes for startups, about 60% of

Only 16% said the government’s policies had made a di erence,

The China angle

Chinese investors have emerged as a major driving force on

August 17, 2018, 10:27 This rising

At the same time, this presents Indian entrepreneurs an

“There is more in common between China and India. However, a

 Startups Technology Corporate Mobile Internet People Brand Solutions

E-commerce Digital Payments Interviews Funding Smartphones NEA 2018 Search

August 17, 2018, 10:27

Mega valuations, multiple rounds of funding, and an influx of

While 23% of the investors surveyed said valuations have gone

More importantly, 62% of the founders surveyed said funding

“We won’t see another bubble in early stage soon,” said an

E-commerce Digital Payments Interviews Funding Smartphones NEA 2018 Search

Term-sheets to founders in the age bracket of 30-40 years have

ETtech Startup fundamentals

August 17, 2018, 10:27

A er two years of relative sobriety, there is a sense of animal

Over 55% of the startups surveyed expect their revenues or

positive, which is primarily making money on each transaction.

E-commerce Digital Payments Interviews Funding Smartphones NEA 2018 Search

  The debate around which company will win Indian internet’s

August 17, 2018, 10:27

When ET did this survey two years ago, respondents expected

Some respondents said while market share dynamics would

“Flipkart has already delivered a multi-bagger exit, as will Ola

India’s Unicorn Club is poised to

technology, diversifying the pool from primarily online retail and

  “Honestly, there are more strugglers than shooting stars in the

August 17, 2018, 10:27

The survey was distributed to about 120 founders and investors.

The survey was led by ET's Madhav Chanchani. Inputs From -

0 Comments ETtech.com  Ravi Ancha

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E-commerce Digital Payments Interviews Funding Smartphones NEA 2018 Search

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