Indian Startup Industry – Good for Investments?
India is a country renowned for its bustling startup industry and the immense number of talented tech professionals. On top of this, their huge population and BRICS status makes it a very attractive destination for VC investment. Here, we’ll be looking into the country’s growth to determine if India’s startup industry is a good place for investments.
Despite being one of the most populous countries in the world, the startup industry in India has been experiencing saturation. Seed and angel funding have been reaching all-time highs in 2015 and 2016, with a startup being funded every 5 hours in 2015. Because of the free-flowing money around the region, India boasts the fastest growing base of startups – worldwide. Some startups bear the potential for great success, while some are just trying to make a quick buck.
Due to the wide spread of options for VCs and angel investors, they’ve become a little more cautious with their funds. In the first quarter of 2017, the volume of angel and seed funding halved in India, in comparison to the first quarter of 2016.
Investors seem to be ploughing more money into later stage companies in India, a trend that seems to be happening in the global startup scene, albeit less pronounced. The startup industry has produced multiple unicorns and businesses that have proven profitability and strong revenue streams. The winners have come out into the open through multiple mergers and acquisitions. According to a VCCEdge report, M&A activity saw a 75% quarter-over-quarter jump.
INDIAN VCS GETTING PICKIER AFTER MULTIPLE SETBACKS
So why are investors tightening their purse strings? Is India facing a shortage of investment funds? According to VCCircle, Indian VCs are sitting on close to US$2 billion in funds that have yet to be deployed. This is proof that VCs are just becoming wiser when it comes to investing, and are being a lot more cautious when placing their bets.
And Indian VCs have good reason to tread lightly when it comes to startup investments. The Indian startup scene saw huge setbacks last year. Flipkart, one of the country’s most promising startups saw massive devaluations throughout 2016. Other notable startups, Snapdeal and Ola also faced devaluations last year. The cause for worry among investors was further exacerbated when Japanese investment behemoth, Softbank, reported losses of US$350 million in its Indian investments.
SHOULD WE BE INVESTING IN THE INDIAN STARTUP INDUSTRY?
Even though the current statistics suggest that investing in India would not be such a wise move right now, there is still hope for India’s startup industry. While ride-hailing and e-commerce made headlines in the past decade, the future of India’s technology points toward deep technology. Examples of this include machine learning, artificial intelligence and virtual reality.
As India’s startup scene is starting to mature and evolve, investors are beginning to regain the levels of confidence evident in 2015. When it comes to identifying the best place to look for great startups, Bengaluru is the clear frontrunner. In just the first quarter of 2017, Bengaluru has secured a total of US$96 million in deal value. This amount accounts for almost a quarter of India’s total deal value. Other notable cities in India include Delhi and Mumbai.
Top 5 investment destinations in India
India is a nation with promising technology that could potentially change the world. The old vanguard of startups that were responsible for record valuations and funding in 2015 are now settling. The time has come for a new wave of companies that will ignite our excitement and imagination. Look past the devaluations and failed acquisition deals to the deep-tech startups bubbling under. We’re expecting big things from India before the end of 2017.
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