The Changing Shape of Indian Startup Ecosystem

The time period of 2015–17 is considered as the Golden Age for Startups in India. During this time, the number of unique deals, number of new startups and funding deals saw great growth but this growth was only stage/industry-specific. Following is a round-up of what has been going on in the startup ecosystem.

The number of VC firms surged 3x from 2000 to the post-2010 era, out of the total $52bn investment in the Indian startup ecosystem, 52% was invested between 2015–17, around 64% of the total deals were during the mentioned period too.

There was also a deal surge of 2.5x and the count of unique startups surged by 2.6x.

Post-2017, India has seen a steady decline followed by a sudden one (due to COVID-19) in the startup investments. Taking 2015 as the base year, the essential factors that drive the startup ecosystem have gone down, the number of funding deals by 18% and the number of unique startups funded by 18%.

Between 2017 to 2018, startups funded at the seed stage saw a fall by 40%, unlike a surge of 4% and 33% in growth and later stage. After 2017, the total funding amount has seen a gradual decline in the startup ecosystem.

2020 brought the greatest hit that the startup ecosystem had to survive due to the coronavirus pandemic which unfurled high uncertainty in consumer aspiration and decisions with the ongoing lockdowns and increase the rise of cases.

The startup ecosystem was particularly affected as the number of deals being registered saw a 14.5% decline.

For the top sectors, across the quarters, deals fell by a significant amount (fintech fell by 28%) showing that investors are now favouring late-stage companies in these sectors.

While industries like HRtech, Communication and E-commerce and saw a significant rise in investments.

The goal for 2020 was to take the digital India initiative a step further, expand the online business and platforms to tier 2 & 3 markets but the pandemic adversely affected these plans since the focus has now shifted to sustainability than innovation. Maturity and stability is being pushed more than early on ideas

Conclusion: Positive investor confidence and sentiment in the seed stage are important for the sustainability of any startup ecosystem in order to push new ideas with the help of capital in the early days. Favoritism towards the later funding stages leads to the absence of innovation and high entry restriction for new ventures

This post was originally published on: Ranjandastalks.com