India Witnessing a Golden Era for Early Startup Funding
- ByStartupStory | November 24, 2022
Team, product, and market fit and the availability of capital have accelerated the growth of India’s startup ecosystem. Five large domestic and international banks have spoken highly of the maturing of the startup ecosystem in India. These banks, which are usually conservative in their approach, have set up startup-dedicated teams to provide services ranging from forex to working capital. Even the healthcare sector, which is late to the startup party in India, warming up to this ecosystem. Many healthcare enterprises are now setting up startup engagement programs. Doctors are taking part by either setting up their startups or becoming significant advisors.
In 2009, startup founders stood the risk that they didn’t tick the checkboxes required to be perceived as suitable marriage material. Today, successful startup founders in India are akin to rock stars, and that has led to startup creation topping joining a consulting or a private equity firm as the career of choice at India’s premier institutes. Some of the best talents are opting to start their startups. Moreover, inter-founder dynamics are excellent, with successful founders making themselves accessible to new ones informally and formally. Lessons learned are passed on, enabling higher efficiencies in the next generation of startups created. Finally, we are seeing the emergence of a new breed of entrepreneurs from Tier II and III cities. The first generation of Indian startups were copycats of other successful products in the US and China. Flipkart replicated the Amazon and Alibaba models, Ola built Uber and Didi of India, and so on. The next wave of startups demonstrating early success is the SaaS players.
A new breed of startups is emerging that is building deep tech solutions for the world –highly innovative, cutting-edge products that build applications in spaces like Artificial Intelligence (AI), biotechnology, AR/VR, Web3, space tech, and other emerging technologies. Market In the shifting nature of the products from India lies the shift in market opportunity. The global TAM of enterprise markets far exceeds the TAM of the Indian consumer market, as we evaluate where the growth opportunity lies for Indian startups. We are moving from addressing domestic challenges with consumer tech and marketplace offerings to creating solutions that address global problems and inefficiencies effectively through SaaS and deep tech offerings.
Viewed from an early investors’ perspective, a startup evolution is a relay, the baton of the lead investor being passed on from one to another as the startup navigates through multiple funding rounds to reach scale. The availability of later-stage funding is key as is a vibrant acquisition and IPO ecosystem. The amount of dry powder sitting with established funds in India, all of whom have raised much bigger funds than their earlier funds, complemented with the emergence of new fund managers setting up their first funds, brings the required scale to the capital availability in India’s VC ecosystem. More importantly, global growth funds are setting up dedicated teams or Investment strategies to invest in Indian startups. In conclusion, we have reached an inflection point marked by both critical masses and the confluence of several factors setting up a ‘reverse perfect storm’ for the hockey stick growth of the Indian startup ecosystem. In public equities parlance, we are at the beginning of a long-term startup bull market. And, in VC parlance, India’s startup ecosystem has achieved product-market fit.
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