2016: a year of cautious optimism in India’s startup landscape?

2015 turned out to be a phenomenal year for startup landscape in India. In October 2015, NASSCOM published a report ranking India third globally with the startup count crossing 4200. Over 760 funding rounds were made in 2015 compared 383 in 2014! As the front-runner in entrepreneurship and innovation, we at CIIE spoke to select startups from our portfolio on their major take-away from last year, and how they foresee the startup in 2016. In this article, we are in conversation with Rustam Sengupta from Boond Engineering and Development, Swapnil Khandelwal from AlmaConnect, Saravannan Sundaramoorthy from Edsix Brain Lab, Vivek Subramanian from Fourth Partner, and Aamir Jariwala from Karma Recycling.

Is 2015 the year when Indian startup ecosystem came of age?

Vivek from Fourth Partner, a renewable energy services company, definitely think so. “Looking back at 2010 when we started off, things were definitely more rosy in 2015. There has been a pleasant change — interest from banks, investors and other stakeholders means that the ecosystem today is more conducive to startups than what it was five years ago.”

There are others, however, who do not seem think on these lines. “We believe that the Indian startup ecosystem is still extremely young and immature. Some success stories and high valuations have brought about a lot of noise in the ecosystem and it will take a while for the momentum to come to an equilibrium state”, said Swapnil Khandelwal from AlmaConect — a startup that provides a platform to connect, network & leverage your private alumni network.

Rustam Sengupta, from Boond — a startup that strives towards equitable energy access through alternative energy solutions — has a different take. “This impression (of equilibrium) can be ascribed to e-commerce, but not so much to the other sectors. Every year is anyway successively better than the next year, but the ‘coming-of-age’ was not so much for other sectors as it was for e-commerce. The major turn-around has been that of startups and investors finally speaking the same language, and raising investments have suddenly become more achievable.”

Key take-away from last year

For Saravannan Sundaramoorthy from Edsix Brain Lab (Skill Angels) — a startup that nurtures brain skills all around — cognitive, emotional and life skill, the last year marked a change in business model from the earlier B2B to the present B2C. “We realized that parents are very progressive about developing cognitive skills and aptitude in their children, and are more approachable. The SuperBrain Challenge, India’s largest online brain skill contest for kids received tremendous response. We are now poised to grow in that direction.”

On the other hand, Aamir Jariwala from Karma Recycling shared that his learnings in 2015 had been about trusting your own gut and not just following numbers or popular belief. “We learnt that if something doesn’t feel right from the beginning itself, either operationally or otherwise, we should not proceed with it even if it sounds financially attractive. Numbers can lie.”

Swapnil (Alma Connect) said, “One key mistake that we have been doing is being too conservative on the front of communicating with our users and prospective users in the fear of being considered as spam. We needed to be a little more aggressive in our user growth.” For Vivek (Fourth Partner), it was about realizing that one always needs to be at the top of the financing game and tighten the costs to survive in a highly competitive sector.

What does the new year hold for Indian startup space?

Looming Investment Crunch

“I feel that in 2016 we will see a good number of companies shutting down, down valuations given and startups looking for real substance in their existence. Venture capital is definitely going to get tougher but it will only force us to think harder about the problems of our business eventually leading to a positive outcome,” said Swapnil (AlmaConnect). He added, “However, I also feel that the pace at which startups are coming up is just going to increase. There is a lot of positivity and low risk of starting up now and the ecosystem is going to remain enthusiastic about it.”

Rustam too shared his view of ‘cautious optimism’ and envisions it contributing to the overall stability and equilibrium in the startup ecosystem. Vivek (Fourth Partner) shared that 2016 will probably go on to prove that startup is not for the faint-hearted, and one needs to be really sure before stepping in.

Hot Sectors

“Technology driven start-ups with deep, ingrained data-collection and analytics are going to hog the limelight in 2016”, said Aamir from Karma Recycling. Saravannan (Edsix) echoed his thoughts, saying that the wonders of technology are only beginning to unfold, and will see a quantum leap in 2016. According to Rustam (Boond), while e-commerce will continue to be the buzzword as a follow-on from 2015, it highly plausible that with India’s high-profile commitment to climate change in COP-21 in Paris, startups in environment and renewables space will see a significant boost.

Startup Policy

Our startups seem to take a fairly pragmatic approach around the soon-to-be-announced startup policy by the Central Government. “See we are not looking for freebies or any special incentives. What we expect to receive is a fair shot at survival. For us startups, it is hard to arrange collaterals for availing working capital working capital from financial institutions, and again without the working capital to fuel sustained operations, creating collaterals will be impossible. It is a chicken-egg situation. Government-guarantee for at least the promising startups in obtaining initial working capital can be a good step in that direction.”

Rustam (Boond) emphasized the importance of streamlining all the interfaces between Government and startups. “Faster, smoother, healthier interactions with the Government will be a welcome change.” Taxation is another area where he sees the policy bringing fresh air. Swapnil (AlmaConnect) reiterated this, “I am hoping government will bring in easy compliances & documentations for share purchase & transfers & that there will be more taxation relief to seed / angel investors.”

Growth and Scale: Mantra for 2016?

For Karma Recycling, streamlining their back-end operations was the key theme last year after achieving proof of concept in 2014. They are now looking forward to the herculean task of scale and commercial growth. “We are working on several partnerships to fuel the growth that we envision. This includes partnerships with investing institutions, large classifieds portals, and OEMs.”

‘Growth and Scale’ as the mantra for 2016 seemed to echo across the 6 startups we spoke to. Boond, which has already electrified over 20000 households, plans to electrify 15000 more and increase the installed capacity of their installed systems to 1 megawatt, while AlmaConnect aspires to claim itself to be India’s no. 1 ‘Real Social Network’ by the end of 2016. Edsix, which already has presence in 1800 schools across 23 states across the country, hopes to strengthen the base and achieve an exponential leap in terms of reach, brand recognition and corporate partnerships.

As a final thought, when asked about advice to fellow entrepreneurs who are looking to take the plunge in 2016, all of them stressed on the importance of getting the business fundamentals straight. “Don’t startup to raise funds, startup to create a business,” said Swapnil.