2016 has been a year of many changes for the Indian entrepreneurial ecosystem. After going through a period of hyper-growth and exponential scale fuelled by big ticket investments, the industry has finally entered a phase of consolidation and maturity. This is most aptly demonstrated in the shift in investor preference from startups with high valuation to early-stage ventures with robust unit economics that promise sustainability and profitability, along with scale.
As a result, even as the overall amount infused into Indian startups decreased significantly, the number of investments made has risen exponentially over the past one year; 815 deals were closed by the end of September 2016, marking an increase of 27% over the 639 deals that had been completed within the same timeframe in 2015.
This was largely due to greater involvement of the country’s HNI segment as early-stage startup investors, and an increased mobilisation of angel investors from different regions across India. The recent relaxation in the regulations governing Alternate Fund Investment by the Securities and Exchange Board of India (SEBI) has also made startups an increasingly attractive asset class for the country’s investors.
The signs have been clear for a while now – angel and other early-stage investments will continue to revitalise the Indian startup landscape in 2017. But in a dynamic market such as India, what sectors will provide angels with an opportunity to maximise their returns? Here is a list of start-up segments that are poised for maximum growth in the coming year:
Artificial intelligence and big data analytics
With businesses, both big and small, themselves facing an onslaught of data almost on a daily basis today, artificial intelligence or AI has emerged as an extremely promising sector for prospective investors. AI-based solutions, particularly automation technologies, big data analytics, and machine learning tools, are being used by companies across business verticals as diverse as ecommerce, ERP, retail stores, healthcare, and information security to gain a critical competitive edge and ensure continued relevance in the market.
With their high-growth, less resource-intensive approach, AI startups allow investors to optimise their investments with minimal risk. Some examples of promising Indian AI startups would be ConfirmTKT, which uses historical data to predict the chances of a train ticket getting confirmed, and vPhrase Analytics, which leverage patent-pending tech to derive insights from analysed data and presents them in words.
Data analytics startups, in particular, are worth watching out for, as they will soon become the norm for the global business ecosystem for optimising operations through data-driven decision-making. One such high-potential startup is Vahanalytics, which captures real-time data about driving habits and road conditions in order to make better drivers and road conditions through smarter data.
With the recent government move to demonetise high-denomination notes, the focus of the Indian economy has shifted on digital payments and adoption of technology to promote financial inclusion. Fintech ventures, with their ease and convenience of usage, are at the forefront of this growing push for digitisation in payments.
Several players in the mobile wallet space have already reported exponential growth in their transactional volumes and user adoption, while other fintech startups such as P2P lending platforms are also poised to benefit from the recent development. The growth witnessed by LenDen Club, a robust credit platform that offers short-term personal loans for salaried borrowers after evaluating creditworthiness, underlines the massive scope of growth for fintech ventures. This is why the sector will be one of the most active investment avenues for angels in 2017.
Virtual Reality/Augmented Reality
With the rapid migration of products, services, and day-to-day activities onto a digital platform, it is no surprise that hi-tech 3D visualisation is fast emerging as a sector that is earmarked for great growth in the future. With their potential scope of creating disruption across sectors such as healthcare, real estate, and manufacturing, start-ups focussing on VR/AR technologies – such as Absentia VR and Drishya360s – should definitely be evaluated by investors looking to optimise their risk capital returns.
The Internet of Things (IoT)
With rapid advancements in technology and increasing adoption of digital devices, interconnectivity is no longer a distant dream – it has become a tangible reality. Wearable technology has become a part and parcel of everyday life, while smart homes and devices have made it possible for companies to deliver better business solutions and optimise their service delivery.
The scope of disruption for IoT technology is immense and ranges from industrial manufacturing to social media and from the retail industry to information security.
This prospect of multi-fold growth and high profitability that IoT-focussed startups, such as Altizon Systems and Entrib, offer is set to attract heavy investor attention in the near future, and make the sector a must-watch for prospective angels.
The exponential adoption of digital devices that the Indian economy has witnessed over the past couple of years has made the country a lucrative market for consumer Internet startups looking to disrupt service delivery through technology. Startups such as Supr Daily, Beardo, Droom, and CoutLoot have received major traction amongst the Indian consumer base in recent times thanks to their differentiated service offerings and have achieved rapid scale as a result.
Investors, therefore, must pay close attention to emerging ventures in the sector, with particular focus on those with a novel approach that target market disruption through technology.
About The Author
[The author of the post, Dr. Apoorv Ranjan Sharma is the co-founder of Venture Catalysts, or VCats, as the VC firm is called – India’s first seed investment & innovation platform.]