Let\u2019s admit it, we\u2019re glad 2016 is done with. RIP. After the highest of highs during 2015, we have witnessed what might be the lowest of lows this past year. Some might prematurely term it the beginning of the end for the Indian startup ecosystem, but we, at Inc42, believe that there is definitely more than meets the eye.\r\n\r\nBefore delving into the report card of our country\u2019s internal startup trends, it is important to see how we figure on an international podium. Here, we trace the factors that outline the current and the future horizon of possibilities for a startup in some of the biggest startup hubs across the world. From the dynamism of entrepreneurship development, economic support and feasibility, to the market in which startups operate \u2013 we aim at informing our audience with an analytical overview of startup landscapes using the following infographic.\r\n\r\n\r\nEconomic Parameters Ranking\r\nAsian and Non-Asian countries have been ranked based on their economic parameters: GDP, corporate tax rate, the number of billionaires, interest rate, \u00a0S&P credit ranking, ease of doing business and corruption rate.\r\n\r\n\r\n\r\n \r\nMarket Parameter Ranking\r\nIn the following graph, Asian and Non-Asian countries have been ranked based on their market parameters:\u00a0smartphone penetration, population, population growth rate, youth (0-24 years), median age, urban population and internet penetration.\r\n\r\n\r\n\r\n \r\n\r\nData and its interpretation always have a strong truth to them, but they are misplaced without a sense of context. 2016 saw a definite slowdown, justified by the mob mentality with which angels and investors jumped onto the bandwagon of funding any and every startup that popped up because of the startup hype that was created by some big ticket fundings in 2015.\r\nThe slowdown is a manifestation of something India does best - over enthusiasm towards anything that is \u2018in.\u2019 This year will find its place in history as the year where senses and logic prevailed. Hooray!\r\nThe sharp 39% decline in year-on-year total funding, was almost equivalent to the sizable fundings received by Flipkart, Snapdeal, Ola in 2015 \u2013 in a war of who can burn more cash.\r\n\r\nIn actuality, 2016 witnessed buoyancy in investor confidence \u2013 showcased by the 18% increase in number of deals. This also figures into the drop in funding in Bengaluru \u2013 almost an exact match in investments grossed, if the money-burning outliers are factored in. Taking nothing away from Delhi\/NCR, however, as the hub was the epicenter of (four of) the largest funding pulls of the year \u2013 a true tour de force.\r\n\r\nHerein, we have a look at how the year panned out, in numbers.\r\n\r\n\r\nFunding Crunch\r\nWe have been talking about the late-stage funding crunch in 2016. The trend has been quite consistent since Q1 2016. Comparing Q4 2015 with Q4 2016, the fall is as large as 66%.\r\n\r\nEven in growth-stage, funding dropped by 56% for Q3 2016 as compared to Q3 2015.\r\n\r\n\r\nStatus Of Startups Funded In 2014 To 2016\r\n2015 saw the launch of three to four startups a day, which helped India secure the third position in the world in terms of number of startups \u2013 4,200 and counting. Last year, a huge amount of money was poured into the startups\u2014on very high valuations\u2014with ideas that were building just the \u201cme too businesses\u201d. \u00a0With no defensibility, weak business metrics, and entrepreneurs, who were largely opportunistic, a lot of startups entered the ecosystem and even got considerable attention from investors.\r\nRaising money became a trend; Q1 (2015) witnessed a whopping 1.3 Bn investment, i.e. 93% increment in investment as compared to Q1 of 2014. But, by the end of Q4 of 2015, the deal activity went down. And the falling trend held till the end of 2016.\r\nIn the meantime, around 31 startups that received funding between 2014-2016 have shutdown, and 32 have been acquired or pivoted to a different business model to survive.\r\n\r\n2016 has truly been tough for startups.\r\n\r\n\r\nKey Sectors On The Rise\r\n\r\n\r\nEven in 2016, ecommerce remains the top market for investment in India, accounting for almost 30% of total funding.\r\n\r\nHealthtech, fintech, enterprise, edtech and media & entertainment are the sectors on the rise. Deeptech, majorly hardware, AI, AR-VR and IoT, is another sector that has come up in 2016. Lot of talks has been observed, however, funding has not been that prevalent in this sector.\r\n\r\nGiven the economic and social importance of these sectors, we wanted to highlight major facts and figures for them.\r\nHealthtech\r\nIn 2016, around 115 deals were made in this sector with a total investment of $140.2 Mn. Although, it has not been a capital-intensive sector, startups have been working towards making healthcare more accessible to the public. India, where the doctor-patient ratio is in decimals, the demand for a more organised service is sure to boost the sector in 2017.\r\n\r\nThe key events for 2016 in this sector:\r\n\r\n \tSequoia-backed Indonesian bike-taxi service Go-Jek acquired Bengaluru-based healthcare marketplace Pianta.\r\n \tAccording to a business standard report, mini-unicorns emerged in healthtech space which included Practo, NetMeds, Portea, and Healthkart.\r\n \tAs per an Economic Times news report, Pune has emerged as the new hub for healthtech startups - owing to its factors like quality of life, cost of living, easy access to talent and more.\r\n\r\nFintech\r\nAround 96 deals with a total investment of $475 Mn was made to this sector in 2016. This year, fintech breathed a sigh of relief - leveraging digital financial services, making them more accessible to the public through e-payment, P2P payment, wallets, online loans, and investment plans.\r\n\r\nThe key events for 2016 in this sector:\r\n\r\n \tDemonetisation of high denomination notes of INR 500 and INR 1000 forced a shift towards digital and cashless economy.\r\n \tAirtel Bank went live. Airtel is the first to launch, with customers in towns and villages across Rajasthan able to open bank accounts at Airtel retail outlets, which would also act as Airtel banking points.\r\n \tPayU\u2019s acquisition of CitrusPay in an all cash deal, expected to lie between $149 Mn-$179 Mn\r\n \tPayPal co-founder Max Levchin madehis first Indian investment; backed fintech startup ClearTax\r\n \tPrime Minister Modi launched a Unified Payment Interface- (UPI) based mobile payment application named Bharat Interface for Money (BHIM).\r\n\r\nEnterprisetech\r\nAround 93 deals were made in this sector with a total investment of $377 Mn in 2016. It is almost the same as in 2015, in terms of deals, however, funding has considerably fallen.\r\n\r\nThe key events for 2016 in this sector:\r\n\r\n \tEnterprise cloud platform Nutanix Inc\u2019s shares during its IPO showed a 130% jump at close of business. It was the best first day pop for a tech startup since Castlight Health Inc. gained 149% in June 2014, and overall the largest since Seres Therapeutics gained 186% in June 2015, with their respective IPOs. The California-based company priced its share offering at $16 per share to raise about $238 Mn on September 30, 2016.\r\n \tZoho released its sixth product \u2013 Zoho Desk \u2013 the industry\u2019s first context\u2013rich help desk software built right out of rural India. Built by a team of 150 people, Zoho Desk uses customer data from past interactions and from other Zoho products like CRM and Projects, prioritises tickets, and intelligently presents information to customer response agents, thus empowering them to better understand a customer\u2019s problem, and resolve it efficiently.\r\n \tChennai-based SaaS startup Freshdesk announced a $55 Mn Series F funding round, led by Sequoia Capital India along with Accel Partners. The newly infused funds will be utilised in fuelling the company\u2019s aggressive expansion strategy across the entire product line. With this round, Freshdesk\u2019s total funding, to date, has touched $150.5 Mn.\r\n\r\nMedia And Entertainment\r\nIn 2016, around 54 deals were made in this sector with a total investment of $141 Mn. It is almost 1.7x the media and entertainment deals in 2015.\r\n\r\nThe key events for 2016 in this sector:\r\n\r\n \tAdTech platform, Media.net, was acquired by a Chinese Consortium in an all-cash transaction valued at about $900 Mn. Founded by Divyank Turakhia, Media.net is a global advertising technology company that develops innovative products for both publishers and advertisers. By market cap, Media.net is one of the Top 5 largest AdTech companies worldwide.\r\n \tVerizon Communications Inc. announced that it will be acquiring Yahoo\u2019s operating business for approximately $4.83 Bn in cash, subject to customary closing adjustments. With Yahoo, Verizon gained the Internet company\u2019s 600 Mn monthly active mobile users, as well as its email service, Yahoo Finance, and micro-blogging site Tumblr, which is popular among millennials. Also included in the deal: the Yahoo brand and real estate attached to the core business including Yahoo\u2019s headquarters in Sunnyvale, California.\r\n\r\n\r\nAngels To The Rescue\r\nAs we can see, VC firms have largely withdrawn from the ecosystem since 2014, and angels have come in to bridge the gap. Since 2014, the number of VC deals have fallen from 49% to 26%, while, angel deals have risen from 32% to 62%.\r\n\r\n\r\nGame Changers\r\nStartup India\r\nIt was on Independence day 2015 that PM Modi coined a new slogan \u2018Startup India, Stand Up India\u2019 - declaring from the ramparts of the Red Fort of his government\u2019s intention to set up a system to enable startups.\r\nIn January 2016, the government launched the Startup India Action Plan.\r\nSalient features of the plan include steps to provide tax exemption to startups for three years and exemptions on capital gains, a compliance regime based on self-certification, legal support, and fast tracking of patent examinations at lower costs. It also entails a credit fund guarantee, support by building a startup India hub, innovation centres, and seven new research hubs, and funding support through a fund of funds with a corpus of INR 10,000 Cr.\r\nDemonetisation\r\nThe one event that shook India and the startup system like never before was the PM\u2019s controversial policy decision on November 8, 2016 - wherein he demonetised INR 500 and INR 1000 notes, setting in motion an event whose impact will be felt for years to come.\r\n\r\nWhile politicians and the nation are divided on the benefits of the move which the PM advocates will remove black money, give an impetus to a cashless society, and digitisation, startups, especially wallet players, have been having a field day after the move. Fintech startups such as Paytm, MobiKwik, Freecharge, all reaped in hefty dividends as far as traction is concerned. As all of India lined up at ATMs and banks for the last two months of the year, most of the startups have welcomed the move, stating it might be painful in the short term, but will be a major push towards a cashless Indian society in the long-term.\r\nConclusion\r\nWe admit it. 2016 has been rough on startups - be it the smallish size of ticket deals, course correction in various sectors or the tightening of investors\u2019 purse strings.\r\nIt is the sign of a maturing ecosystem that the economy has been able to ride the storm of dried-up funding, the alleged burst of the startup bubble and emerge as the third-largest startup ecosystem in the world - with no signs of stopping it - right behind the US and China.\r\nWhile the last 12 months have given a clearer, if slightly less-than-optimistic picture than what emerged in years before, there is no denying this fact: Indian startups have begun to claim their place at the top of the global tech food chain. With the emergence of new unicorns and rising foreign investor interest who are bullish on the economy, as a whole, 2016 was a mixed bag of hits and misses.\r\n\r\nWe, at Inc42, cannot wait to uncover what the new year will bring to emerging businesses and intrepid entrepreneurs, in terms of valuations and value - as always providing a bridge between our audience, startups, investors, and experts.