India is home to over 3,000 start-ups with an addition of 800+
new start-ups in 2014. A National Association of Software and
Services Companies (NASSCOM) report reveals that India is the
fastest growing and fourth largest start-up ecosystem in the world
after the US, the UK and Israel. India is expected to cross 11,500
start-ups by 2020, generating employment opportunities for over
Indian start-ups are dominated by e-commerce / aggregators and
technology companies, offering various products / services
including Big Data & Analytics, Enterprise Resource Planning
(ERP), Product & Collaboration, Edu-Tech, Ad-Tech etc., with
over 59% focused on B2C categories. Approx. 43% have focus on the
global market demonstrating the global mind set of the
entrepreneurs in India.
The main growth drivers for the increasing number of start-ups
in India are:
The high growth domestic
India has the second largest telecom
subscriber base in the world touching nearly 979 million by the end
of Jan 2015, with an estimated 33% internet penetration by June
Returning NRIs with brilliant
business concept and ability to invest in seed capital
The biggest challenges faced by the Indian start-ups include
lack of essence in business models, underestimating competition,
keeping pace with the ever changing market dynamics, adding /
sustaining talent, running out of cash to finance initial cash burn
and difficulty in accessing capital.
Capital raising in India is maturing. In CY 2014, India
witnessed an increase in early stage investment, with Angel / seed
investments recorded at USD 115 million spread across 285 deals, a
growth of 66% in value compared to CY 2013 whereas venture capital
investments grew 51% in value from USD 1.41 billion to USD 2.15
billion. In 2014, e-commerce start-ups like Flipkart and Snapdeal
have attracted massive investments with Flipkart raising approx.
USD 1.7 billion in three rounds. Veteran entrepreneurs like Ratan
Tata (Tata Group), Narayan Murthy (Infosys) and Azim Premji (Wipro)
are also backing various promising start-ups e.g. Bluestone, Urban
Ladder, Snapdeal and Myntra.
Due to high capital infusion and increasing competition, India
is witnessing consolidation in the start-up industry which will
intensify even further. In May 2014, Flipkart bought fashion portal
Myntra and Ola Cabs acquired its rival Taxi-For-Sure in March 2015.
On the other hand, Zomato, an online restaurant search and
discovery service provider, has acquired various international
firms to increase its global presence.
Start-ups are betting high on the evolving ecosystem and support
from the government would accelerate things further. Indian
start-up companies have the potential to become future billion
dollar enterprises as demonstrated by some of the companies like
Flipkart (USD 1.6 billion), Inmobi (USD 1 billion), Just Dial (USD
2 billion) etc.
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