The highs and lows in the funding for the Indian startup ecosystem continues, and the spikes seem to have become sharper, causing more heartache to investors and entrepreneurs alike.
Consider the following figures – In 2013, Indian startups raised funding of $1.6 billion in 300 deals. In 2014, that figure was $5.2 billion in 304 deals. In 2015, the figures were $9 billion in 912 deals, and in 2016, the figures were $4.4 billion in 1017 deals. A key reason for the sharp decline is the fact that in 2015, sectors such as food, hyperlocal, ecommerce and taxis were the flavours of the year. In 2016, we have not seen any such sector favourites.
Ecommerce companies did raise later rounds, but smaller in size. We have reached more realistic levels, and while we feel confident that we are progressing towards a more intelligent and mature ecosystem, I doubt that we will see the 2015 levels of funding in either 2017 or 2018.
Deals up
The good news is that the number of deals has gone up dramatically and continues to go upwards. In fact, the number of new startups founded in 2016 has gone down, yet the number of startups that has got funding has gone up. One key reason is the number of startups getting funding at an early stage continues to go up.
In 2016, there were 579 startups that got funding to the tune of half a million dollars, versus only 211 in 2015. This is a good sign since these startups are making a pipeline for larger funding in 2017 and 2018. It also means the number of angels/early stage investors is increasing, people continue to have faith in the Indian ecosystem, but the risk appetite has gone down.
The Consumer segment got the largest funding of $1.2 Billion in 2016. This includes Makemytrip, Hike, Oyo, Bookmyshow – companies that provide innovative products (non-physical) and services directly to consumers. Even though there is a lot of potential in this segment, It does not seem that this segment will grow too much in 2017, since there is no strong pipeline of innovative consumer startups gearing up for big fund-raising.
The Retail segment got funding of $975 Million in 2016. This included companies such as Snapdeal, Bigbasket, Shopclues, Lenskart, Little and Pepperfry, who together got more than 50% of that funding. This funding is much less than in 2015,…