Since the inception of Inc42 in 2014, we have been keenly following the progress of the Indian startup ecosystem and how it has consistently grown and have been strengthened. Our annual funding reports are a testament to our profound conviction that startups have a vital role to play in the growth paradigm of the Indian economy and its subsequent plan to boost employment in the country.
But the growth story of the Indian startups is not always sublime as it seems to be. Only recently, in 2017, the Indian startups were at a crossroad.
While, in the past couple of years (2014-2016), startups were pampered with excessive capital, high-ticket rounds and escalated valuations, the reality is setting in with the harsh conditions startups are facing now. As a consequence, 2017 saw a major course-correction. Startups that over-spent and over-hired during the period of exuberance are now cutting down expenditures, shed jobs and spout profitability as their definitive mantra.
Such a fluctuation in a nascent market, although, quite normal, is sure to cause a rattle. This is why we need a strong ecosystem to support them.
In 2017, around $3.2 Bn was invested in the ecosystem through 885 deals. However, according to the Indian Tech Startup Funding Report 2017 by Inc42 DataLabs, the top 1.7% startups consumed $2.6 Bn investment amongst themselves leaving an evident funding vacuum in the ecosystem.
For a business ecosystem to grow sustainably, we need relevant data to analyze the root cause that leads businesses to a bubble so that we may take corrective measures to prevent business from bursting like a bubble in the future. While the funding data suggests an investment vacuum, a Series A crunch and a late stage funding surge, finding the root cause would need specific data in various contexts other than investments.