The year 2014 was boom time for startups in India. Over 1250 new startups were launched in 2014. Internet companies in B2C space, those serving end-consumers were the flavor of the season, fuelled by growth of internet users on mobile. Out of estimated 300 million internet users in India, smart phone users are 200 million. Value of startup funding reached $4.68 bil in 2014. Established and early stage startups alike were flush with funds.
Nearly 270 early stage investments were made. VCs made First round funding in 177 companies , out of which 22 startups raised over $ 2 mil. Sixty companies raised second round funding. Even startups with little or no revenues to boast managed to raise funds from VCs and angel investors. E-commerce companies – mainly Flipkart and Snapdeal – too the major pie of funding with $ 3 bil. This funding appears to be driven by greed rather than cold calculations – Flipkart and SnapDeal continue to make losses after more than six years and four years of operations respectively.
Online retail with 46 rounds of funding and $3046 mil was the overwhelming leader, with transport (think Olacabs) vertical at 9 rounds and $ 307 mil lagging behind. Real Estate with 8 rounds and $ 222 mil was at the third rank. While brash founders like Kunal Behl of Snapdeal cliam that their startups solve basic problems of people, a hard look at lineup of startups reveals that all that they offer is better convenience or discounts to the consumer, based on ecommerce. How basic is that?
Valuations are going to bubble time levels, hedge funds are coming in and even individual big investors like Russian millionaire Yuri Milner have invested in Olacabs and housing.com. Investor enthusiasm will dampen when flow of foreign funds choke up or the startups fail to turn profitable. Globally tech companies are opting for private investments rather than IPO.
Indian tech startups have never had it so good, helped by a robust eco system of mentors, startup networks, conferences, angels and VCs.