Indian Startup Ecosystem PDF

Section 1 The Entrepreneurial Perspective Chap...

Section 1 The Entrepreneurial Perspective Chapter 2 Indian Startup Ecosystem ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.  Startup Ecosystem – Introduction The discipline of entrepreneurship borrowed the term “ecosystem” from biological sciences. A startup ecosystem is a set of interconnected factors, including entrepreneurs and their ventures interacting as a system, forming a conducive environment for the creation of new ventures and innovation. Startups that are associated with a strong and well- developed entrepreneurial ecosystem have higher chances of success vis-à-vis the ones which are not. Top startup cities in the world are Berlin (Germany), Tel Aviv (Israel), Helsinki (Finland), Stockholm (Sweden), Bengaluru (India), London (U.K.), and San Francisco (U.S.A.). ©McGraw-Hill Education.  Emerging Trends in the Indian Startup Ecosystem  Entrepreneurs from successful start-ups are acting as angel investors to support new ideas – Serial entrepreneurs have founded more than 150 start-ups.  Some of the investors are turning in to entrepreneurs. More than 20 start-ups founded by former investors.  2019 turned out to be a remarkable year, with seven unicorns added into the unicorn club.  Start-ups in 3D printing, robotics, cryptology, and block chain are emerging  The number of unicorns expected to be around 100 by 2025  Global unicorns are leveraging the Indian start- ©McGraw-Hill Education.  Role of Ecosystem Components in the Life-journey of Startups The lifecycle of startups can be divided into three stages: Founding stage Getting traction Growth and scaling The first stage needs good quality entrepreneurs and the presence of drivers to support entrepreneurs to traverse the journey from the idea to the commercialization of the idea. For the second and third stages of the startup to takeoff, the availability of finance, market, and human resources decide whether the chasms between the different stages of the ©McGraw-Hill Education.  Activities of Indian Startup Ecosystem India has seen multiple startup waves since 1980s. The first startup wave started with information technology, computer hardware and software focused companies seeded in India and becoming global corporations. The second wave was driven by Internet boom, and several consumer Internet companies were started. Eg. Info Edge India, Bookmyshow. The third wave started in 2005–06 with graduates from IITs and IIMs having experience in companies such as Amazon and Mckinsey starting companies such as Policybazar, InMobi, and Quikr. ©McGraw-Hill Education.  Activities of Indian Startup Ecosystem The next wave started in 2011 with the increasing penetration of smartphones, availability of high- speed Internet, and an increase in Internet data consumption. This period saw the rise of e- commerce startups. This period saw the rise of e-commerce startups—Flipkart and many others, and aggregation startups such as Ola cabs and OYO rooms. The latest wave is the serial entrepreneurial initiatives of the ex-founders of previous waves and new startups using deep technologies. ©McGraw-Hill Education.  Technology Focus of Indian Startups The sectors which had seen more than 50% growth between 2014 to 2019 were Edtech, Fintech, Mobility, Automotive, and Health Tech. Agritech was expected to be one of the high growth sectors soon. Close to one-fifth of the startups are leveraging deep technologies—Artificial Intelligence and Machine Learning, IoT, Big Data and Analytics, Blockchain, AR/VR, Drones, Robotics, 3D printing, virtualization, and cybersecurity. ©McGraw-Hill Education.  Major Start-up Hubs in India Hub Name Share of #of Startups Unicor ns Bengaluru 23-24% 11 Delhi-NCR 20-21% 10 Mumbai 12-13% 3 Others (Pune, 42-45% 3 Hyderabad, Chennai) ©McGraw-Hill Education.  Sector-wise Categorization of Indian Startups Mature sectors: Fintech, Enterprise, Retail and Retail tech, and Health tech Emerging sectors: Supply-chain management and logistics, Real estate and construction, Travel and hospitality, Edtech, Media and entertainment Nascent sectors: Aerospace and defense, Industrial and manufacturing, Agritech, Energy and Utilities, and Human resources. ©McGraw-Hill Education.  Start-up Hubs in India Startup hubs are regional ecosystems concentrated in certain cities where different components of the startup ecosystems are present to provide support to the new startups. Emerging sectors: Supply-chain management and logistics, Real estate and construction, Travel and hospitality, Edtech, Media and entertainment Nascent sectors: Aerospace and defense, Industrial and manufacturing, Agritech, Energy and Utilities, and Human resources. ©McGraw-Hill Education.  Startup Hubs – Categories Established Startup Hubs- Bangalore, Delhi- NCR, and Mumbai account for about 55-60% of the startups in India, with Bangalore having 24% of the share, Delhi 20% share, and Mumbai about 12% of the share. Emerging Startup Hubs- The cities which are coming up as hubs of startup activity are Hyderabad, Pune, Chennai, Ahmedabad, Jaipur, Kolkata, and Kochi. More than 150 startups are based in emerging startup hubs. ©McGraw-Hill Education.  Startup Hubs – Categories New Startup Hubs- The new cities which are making their presence registered in the Indian startup ecosystem are Thiruvananthapuram, Kanpur, Chandigarh, and Coimbatore. More than 40 startups are based in new startups hubs. The Emerging and New Startup hubs account for 40 to 45% of the startups and they are growth fast. ©McGraw-Hill Education.  Comparison of the top Global Startup Ecosystems USA China India U Israe K l Count of Unicorn 203 206 24 21 7 Average time to become Unicorn 6-8 4-6 6-8 7- 5-7 (years) 9 Average Valuation ($ billion) 3.2 3.8 3.2 2. 1.3 4 No of Innovation clusters with 24 18 5 4 4 minimum one unicorn No. of funded start-ups (in 1000’s) 57 9 6.4 10 2 No of incubators and accelerators 15,00 2,400 140 50 130 Total Engineering Graduates (in 0.26 4.6 1 0. 0.01 Millions) 07 Total no. of internet users (in 270 800 520 59 7 Millions) Ease of Doing Business rank, World 6 31 63 8 35 Bank 2019 ©McGraw-Hill Education.  Top Ten of the Indian Unicorn Club Valuati Founde Unicor # Company Sector on ($ Location d n Year billion) E- 1 Flipkart 21 2007 2012 Bangalore Commerce 2 Paytm Payments 16 2010 2015 Noida Oyo Budget 3 10 2013 2018 Gurgaon Rooms Hotels Byjus 4 Edtech 8.2 2008 2018 Bangalore Classes E- 5 Snapdeal 6.5 2010 2014 Delhi Commerce Ride 6 Ola 6 2010 2015 Bangalore Hailing Freshwor Chennai/San 7 SaaS 3.5 2010 2018 ks Mateo 8 Swiggy Foodtech 3.5 2014 2018 Bangalore 9 Zomato Foodtech 3 2008 2015 Gurgaon Paytm ©McGraw-Hill Education. E-  Indian Unicorn Club – Latest Entries Valuati Compan Founde Unicor # Sector on ($ Location y d n Year billion) 20 Dream11 Gaming 1.1 2008 2019 Mumbai 21 InMobi Mobile Ads 1 2007 2011 Bangalore PolicyBaz Insurance 22 1 2008 2018 Gurgaon aar Tech Citius IT - Mumbai/ 23 1 2005 2019 Tech Healthcare Princeton Contract 24 Icertis Manageme 1 2009 2019 Pune/Bellevue nt Data Druva Pune/ 25 Manageme 1 2014 2019 Software Sunnyvale nt Trucking 26 Rivigo 1 2014 2019 Gurgaon Services 27 BigBasket Groceries ©McGraw-Hill Education. 1 2011 2019 Bangalore  Startup Ecosystem Components (SEC) Entrepreneurs and Potential Entrepreneurs Academic Institutions Culture for Entrepreneurship Supporting Infrastructure: Incubators, Accelerator, and Co-working Space Availability of Funding Consumption Potential in Home Market Government Policy for Supporting Businesses ©McGraw-Hill Education.  SEC- Entrepreneurs and Potential Entrepreneurs Entrepreneurs not only create new ventures, but they also introduce new platforms for others to build their ventures. Entrepreneurship in a region is influenced by existing entrepreneurial activity in a region, and return of overseas educated and work-experienced to a region after being exposed to entrepreneurial activities. Employees of existing technology companies, and alumni of Indian ivy league colleges, having exposure to global startup ecosystem have powered the start-up growth in India. Increase in numbers of failed entrepreneurs and exit- entrepreneurs is building the mentor-pool and investor-pool in the Indian start-up ecosystem. ©McGraw-Hill Education.  SEC- Academic Institutions Academic institutions play a critical role in building a productive startup ecosystem. Top academic institutes have been the principal source of entrepreneurial talent in India. Several institutes of higher education in India, introduced Entrepreneurship as a compulsory or elective course. However, these curriculums need to be taught with a practice-oriented pedagogy involving practicing entrepreneurs or mentors in the delivery of the curriculum. Incubation centers and entrepreneurship cells operating in the higher education have been useful in creating awareness about entrepreneurship and building a favorable orientation for entrepreneurship among the graduates. ©McGraw-Hill Education.  SEC- Culture for Entrepreneurship Traditionally encouragement for entrepreneurship has been low in India. Several factors are improving the acceptance of entrepreneurship as a career in Indian society Introduction of entrepreneurship courses in engineering and management institutions Rise of entrepreneurship cells in colleges leading to increase in events on entrepreneurship Rise of Unicorns in India and celebrity status of some startup founders Success of Indian entrepreneurs and venture capital managers in global arena Government initiatives—both central and federal—to make startup popular Wide publicity of “startups” in popular media ©McGraw-Hill Education.  Culture of Entrepreneurship - Women Entrepreneurship in India NSSO found women manage 14 percent of 8 million businesses in India. An Assocham India study in 2016 found that 9% of total startup founders are women. Participation of women in entrepreneurship activities in a wide range of sectors like pharma, fashion, fintech, media, retail, and social ventures. Top women entrepreneurs in India are Kiran Mazumdar Shaw (Biocon); Vandana Luthra (VLCC); Shahnaz Hussian (Shahnaz Herbals); Meena Ganesh (Growthstory, Portea Medical); Suchi Mukherjee (Limeroad), Ricka Kar (Zivame); Falguni Nayar (Nykaa); Vani Kola (Kalaari Capital); Shradha Sharma (Yourstory); Upasana Taku (Mobikwik); ©McGraw-Hill Education.  SEC- Supporting Infrastructure: Incubators, Accelerator, and Co- working Incubators provide physical Space office space—or virtual incubation—and support for the idea to product development journey, facilitate seed funding, mentoring, and act as a bridge for networking. Accelerators are support systems in entrepreneurial ecosystems which accelerate the journey of the startups. They provide infrastructure, mentorship, funding, and networking support for startups having proof of concept or prototype—usually a ready product. Co working Spaces are plug-in-plug-out model of office spaces, with all functional support and amenities, provided as pay-as-use mode. One of the significant advantages of such spaces—besides the ©McGraw-Hill Education.  Incubators and Accelerators— Facilitating the Growth of the Startup  As of 2019, thereEcosystem are 335 active incubators and accelerators up from 320 in 2018  These incubators can support approximately 5,000 start-ups manually  Numbers expected to expand 450+ by 2025.  There has been a substantial rise in academic incubators  Start-ups hubs like Bengaluru, Delhi-NCR, and Mumbai continue to dominate the emergence of new incubators and accelerators.  Emerging incubators are focussing on technologies like AI/ML, cloud, IoT, big data analytics. ©McGraw-Hill Education.  Incubators and Accelerators— Facilitating the Growth of the Startup Ecosystem  In India, more than 50% of incubators and accelerators are located in Tier II and Tier III cities  In India, most tech-entrepreneurs have education background from IITs/IIMs  Incubators and accelerators provide funding, mentorship, and networking opportunities as they have tie-ups with industry leaders and government bodies.  Corporate and independent accelerators have better networks and fundraising potential.  Regional incubators face a challenge in terms of lack of mentors, lack of infrastructure, and limited access to findings. ©McGraw-Hill Education.  Snapshot of Some Incubators and Corporat Accelerators Independ Academic Government e ent Supported CISCO Indian Angel Sine (IIT 10000startu Launchpa Network Mumbai) ps d incubator CIIE (IIM (Bengaluru) Microsoft Villgro Ahmedabad T-hub Scaleup GSF ) (Hyderabad) Google Tlabs NRSCEL (IIM Icreate Launchpa Venture Bangalore) (Ahmedabad d Nursery INFUSE (IIM ) JioGenNe Prime Ahmedabad iStart Nest xt Venture ) Incubator Maruti Partners (Rajasthan) Suzuki Kerala MAIL Startup Mission Dalmia smart city ©McGraw-Hill Education. accelerator  SEC- Availability of Funding Availability of financial capital in an ecosystem is a critical resource for influencing startup activity. Major global investors such as Alibaba, Tencent, Sequoia Capital, and Softbank have invested in several Indian startups. A new fund-of-fund of INR 20000 crore has been announced by GOI; this is expected to make capital available for micro-VCs and VCs. The funding needs of startups vary depending on their nature and stage. ©McGraw-Hill Education.  SEC- Availability of Funding The funding needs of startups vary depending on their nature and stage. For technology-based scalable, startups can be divided into three stages. Seed Stage- needed in the first one to two years of the startup. Early Stage Capital- arises in the second to third year, requires funding from venture capital firms for developing and iterating the business model and building traction in the business. Late/Growth Stage- arises in the fourth to fifth year, used for scaling up Funds for these stages should be available in the ecosystem ©McGraw-Hill Education. Top-10 Angel Investors in India in 2020 # of companies Angels in Portfolio Representative start-ups Druva, Unacademy, Innovaccer, Rajan Anandan 95 Cappilary, Dunzo Anupam Mittal 61 Ola, Druva, Rapido, Rupeek, Whatfix Reverse Logistics, Wow Momo, Stayzilla, Anand Ladsaria 53 Appsdaily, Unbxd Ola, Snapdeal, Urbanclap, Housing.com, Kunal Bahl 49 Razorpay Unacademy, razorpay, Shuttl, Rupeek, Kunal Shah 48 Spinny Wow Momo, Stayzilla, Box8, Unbxd, Raman Roy 46 FabAlley Kris Firstcry, Lenskart, cure.fit, Acko, Gopalkrishnan 43 MedGenome Ola, Snapdeal, Urbanclap, Housing.com, Rohit Bansal 41 Razorpay Ola, Snapdeal, Paytm Mall, Firstcry, Car Ratan Tata ©McGraw-Hill Education. 40 Dekho  Top-10 Venture Capital Investors in # of India in 2020 companies VCs in portfolio Representative startups Brand Capital 450 Snapdeal, Byju's Bigbasket, Quikr, Fassos Sequoia Capital 215 Ola, Oyo Rooms, Byju's, Grofers, Zomato Blume Ola, Zomato, Unacademy, GreyOrange, Ventures 153 Dunzo Accel 148 Flipkart, Ola, Swiggy, Freshworks, Cure.fit Village Simpa Networks, Doubtnut, Siksha Capital 134 Finance, Ftcash, Cashfree Axilor Sigtuple, Pocket Aces, Niramai, Urban Ventures 114 Piper, Vyapar SIDBI Venture Billdesk, Fourcee Infrastructure, Manthan Capital 102 Retail, EASF Bank, EASF Microfinance SAIF partners 101 Paytm, Swigy, Paytm Mall, Firstcry, Rivigo Matrix Ola, Zomato, Quikr, Mission Electric, Five Partners 93 Star Business Finance Snapdeal, Cure.fit, Vogo, Medplus, Urban ©McGraw-Hill Education.  SEC- Consumption Potential in Home India is a transitionMarket point of a huge opportunity of high economic growth, and rise of upper-middle and high-income segment. This trend, supported by a rising, young working population, millennials, and generation Z— liberalization economy, digital-age born children— moving into buyers’ shoes, is going to create a supportive home market for upcoming entrepreneurs and startups. Several drivers will keep driving growth in Indian markets—until at least 2030: Income Growth, Urbanization, and Favourable Demographics ©McGraw-Hill Education.  Government Policy for Supporting Businesses Easing the process of starting of business Dealing with construction permits Cross Border Trading: An electronic system— eSanchit—introduced to simplify filings Resolving insolvency In January 2016, GOI launched Startup India Policy. After this, several initiatives such as launching a government portal “startupindia.gov.in”—to support resources, networking access, schemes for women and underprivileged entrepreneurship ©McGraw-Hill Education.