Unlike 2015, that saw the most fast-paced year in India’s startup world, 1st Quarter of 2016, showed a change in dynamics in the Indian startup ecosystem.
2015 was like a gold rush: Easy to raise funds (in large amounts), as long as you were tackling problems that are trending according to major venture capital firms (both Indian and global) and Uber for X or the me-too startups. The Q1 (2015) witnessed a whooping 1.3 Bn (excluding undisclosed) investment i.e. 93% increment in investment as compared to Q1 of 2014.
In 2015, on an average three to four startups were launched every day. This led India to secure the third position in the world in terms of the number of startups, 4200 and counting. Entrepreneurs started to expect very high valuations with ideas that at best were replicas of already successful ideas elsewhere. No defensibility, weak business metrics, and entrepreneurs who were largely opportunistic, were entering these spaces (hyperlocal services like food delivery, grocery and laundry). And, these entrepreneurs were able to raise money from investors at quite high valuations.
Raising money became the trend, not the exception. No wonder experts have been skeptical about India’s startups being in a bubble. A deceleration was observed in the ecosystem by the end of Q4 of 2015, the deal activity was certainly lower.
Amidst the recurring flames of uncertainty revolving around the investment scenario in India, the often-so-talked bursting of the bubble; Indian startup ecosystem showed a considerable good recovery at the start of this year. The opening quarter of the year 2016 has observed a significant uplift in terms of deal volume and total investment size as against last quarter of year 2015. But, it remained relatively timid (24%) as compared to the disruptive growth observed in 2015 (almost 93%) in terms of deal value. A total of 285 deals were observed.