2016 Devaluations Not Worrying For India's Start-Up Climate, Say Experts

Investors say India's start-up ecosystem is here to stay even next year.
Investors say India's start-up ecosystem is here to stay even next year.

New Delhi: 2016 has been quite a roller coaster for India's start-up ecosystem, experts say, with funding getting tighter, more start-ups shutting shop and the recent note ban propelling fintech into the forefront. But let's get into some specifics.

Start-ups raked up a total of 4.2 billion dollars in funding in 2016, which is 46 per cent lower than the total of 2015 and even 33 per cent lower than 2014, according to Nucleus42, a provider of start-ups data. In addition, start-up casualties went up to 32 this year compared to 11 in 2015, or in other words, one start-up shut down every 11 days in 2016. The likes of Peppertap, Dazo, TinyOwl and Zupermeal closing shop proved that foodtech and hyperlocal start-ups didn't have a very good year. Still, experts say this isn't worrying for India's start-up climate.

"I think things normalised in 2016 in terms of expectations, the valuations had risen unrealistically. There's been a clear dip in both deals made and funding allotted, but you know that's just cyclical," explains Girish Shivani, executive director and co-founder of YourNest Fund, an early-stage venture capital fund.

Now looking forward, what can be expected of this start-up ecosystem in the new year? The recent note ban, they say, has led the digital payment sector to be one to watch out for, amongst others. "We are bullish about B2B IoT, automation, artificial intellegence and machine learning. There's also a lot of innovation happening in robotics, distributed leger technology and block change," Mr Shivani adds.

Still, investors maintain that the core of any good start-up has to be a great idea that solves a problem. Padmaja Ruparel, president of the Indian Angel Network, says, "I think what we are looking for are ideas that will make an impact in society and solve a problem. For example, we urge entrepreneurs to look at solutions in spaces of water, pollution, health, urban transport."

Year 2016 also saw massive layoffs in start-ups, with Grofers, Ola, Quikr, Zomato, Askme and many more together handing out 10,000 pink slips over one year. Experts say these companies were forced to narrow their resources after the bullish boom of 2015. Still investors agree that even next year, India's start-up ecosystem is here to stay.