The year that was – Start-up Report Card 2019

////The year that was – Start-up Report Card 2019

The year that was – Start-up Report Card 2019

by Dr Param Shah

With the rise of seven unicorns in 2019 and 54 more expected in the next five years, the Indian start-up ecosystem is reflecting a steady upward graph.

Highlights:

  • Indian start-ups received over $4.4 billion in total funding from January to September 2019.
  • 2019 also saw a rising trend of several big corporate houses investing their surplus funds for investment in start-ups.
  • With the ease of resource availability and proximity to the market, India is expected to have almost 54 tech unicorns by the year 2024.

India is considered to be among the top five start-up ecosystems in the world. It is expected to have a year-on-year growth rate of almost 10-12 per cent. During the past few years, the Indian start-up ecosystem has bounced and attracted significant interest and attention. This development has taken place due to factors such as consolidation activities, massive funding, development of technology coupled up with a burgeoning domestic market. 2019 saw over 1,300 start-ups added, taking the tally to over 8,900 start-ups. The rise in the number of start-ups, ranging from almost 3,000 ventures in 2014 to the current number, will help to surpass the projection of almost 11,000 by the end of 2020.

As per the data compiled by DPIIT, India has over 300 incubators and accelerators managed by academic institutes, corporates, private players and the government. Majority of these incubators are supported by Central and State governments through capital and operational grants under several schemes. This enabling environment has resulted in the growth of start-ups not just in Tier 1 cities but also in Tier 2 cities in India.

Funding for Indian start-ups

Funds and finance are what drives any business. There was a major dearth of capital to fund start-ups during the initial stages of the process of developing an entrepreneurial ecosystem. But with the passage of time and different funding options being made available, finance is not a major concern for entrepreneurs and start-ups. Almost $4 billion had been pumped into 1,040 ventures during the year 2017-18. Around $4.4 billion was the total funding amount received by the start-ups from January to September 2019. This shows a positive uptrend in the funding for start-ups.

On average, it was noticed that four start-up deals had been announced in a day throughout the year 2018. Such great work is only possible due to the ease of funding. Angel investments are said to be on the rise. As compared to 2018, there is an increase of 20 per cent for active investors in 2019.

Modern-day organisations are identifying the disruptive potential of the Indian start-up ecosystem and are partnering/investing in several start-ups to get manifold returns for their investments in such start-ups. According to the KPMG 2018 CEO Survey, it was reported that almost 45 per cent of the CEOs who were surveyed stated their organisations to be extremely capable of receiving financial beneficial by investing in start-ups.

Major deals

Looking into the details of the major deals, several big corporate houses are investing their surplus funds or even keeping aside funds for investment in start-ups which they think are likely to be beneficial for them. Wipro has a $100-million fund which it has set aside to invest in IT-based start-ups. IBM is teaming up and joining hands with 100 Indian big data and other IoT start-ups. Apple recently acquired Tuplejump, an AI-based start-up that is based in Hyderabad.

The proactive actions of the academia, local communities and state governments are major drivers for the growth of such new start-up hubs. Cities such as Delhi-NCR, Bangalore and Mumbai are the launchpads for almost 55-58 per cent of the start-ups. Bangalore has the largest share of start-ups of almost 24 per cent, followed by Delhi-NCR having around 20 per cent and Mumbai having approximately 15 per cent. The remaining 40 per cent are spread in different parts of the country.

New unicorns on the block

The investments were better distributed across the year 2019 as compared to the previous year. They were scattered across different sections of the start-up ecosystem. This led to a significant increase in the total number of start-ups having more than $50 million as funding assistance, thus creating a strong base for the potential unicorns.

A growing pool of start-ups having sufficient resources available at their disposal to gain market share confirms that the years 2018 and 2019 were not an exception in terms of several start-ups becoming unicorns.

A booming pool of experienced personnel combined with the country’s unique parallel start-up ecosystem is a primary factor to support the continuous growth of the Indian start-up ecosystem.

2019 has seen the rise of seven new unicorns till now. The Indian unicorn club has companies from supply chain and logistics, enterprise, gaming, e-mobility, e-commerce, and mobility. The latest entrants of the unicorn club are BigBasket, Dream 11, Druva, Delhivery, Rivigo, Ola Electric and I certificateWith great potential in the Indian ecosystem in terms of ease of resource availability and proximity to the market, the country is expected to have almost 54 tech unicorns by the year 2024.

Major trends

The individuals who were earlier entrepreneurs are now turning into investors to bring in more maturity to the Indian start-up ecosystem. Possessing a stint as entrepreneurs earlier, they act as more capable mentors for the new entrepreneurs in comparison to the other angels and investors. This can be one of the important factors for almost 54 new unicorns to be born in the coming five years. The future of the Indian start-up ecosystem is shining bright.

Dr Param Shah is Director – UK at the Federation of Indian Chambers of Commerce & Industry (FICCI).

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Disclaimer: The views expressed herein constitute the sole prerogative of the author. They neither imply nor suggest the orientation, views, current thinking or position of FICCI. FICCI is not responsible for the accuracy of any of the information supplied by the author.

2020-03-17T06:17:12+00:00December 27th, 2019|2019, UK Edition – 27 December 2019|

About the Author: Dr Param Shah