B2B AND ADVANCED TECH START-UPS LEADING THE GROWTH FOR THE INDIAN START-UP ECOSYSTEM
Bengaluru, 02nd Nov. 2017: Strengthening its position as the third largest startup ecosystem across the world, amidst intensifying competition from countries like UK and Israel, India continues its momentum of being one of the most vibrant landscape for start-ups. Adding over 1000 tech start-ups in 2017, taking the total number of tech start-ups to 5000-5200, India is witnessing a rapid rise in the B2B tech start-up landscape, focused on verticals like healthtech, fintech, and ecommerce/aggregators. While Bengaluru, Delhi/NCR and Mumbai retained their position as the key start-up hubs in India, 20% of the start-ups emerged from tier II/III cities. These trends were discussed at the launch of the 2017 edition of the NASSCOM-Zinnov report on the ‘Indian Start-up Ecosystem – Traversing the maturity cycle’, released on the sidelines of the of the annual flagship NASSCOM Product Conclave 2017.
MATURINGECOSYSTEM - FROM QUANTITY TO QUALITY
•Over 1000start-ups added in 2017
•Indiacontinues to be the 3rd largest start-up hub globally
•Tier II/IIIaccounting for 20% of the start-ups
•Almost 50%of 2017 incepted startups in the B2B segment
•Advancedtech startups growing at 30% CAGR
•YoYstart-up growth in top verticals – Health-tech (28%), fin-tech (31%) andecommerce (13%)
Median ageof founders: 32 years
Over 450student start-ups, driven by academic incubators
•‘Build forIndia’ - Social impact startups building solutions for core India problems
Sharing histhoughts, Mr. Raman Roy, Chairman, NASSCOM, and CEO and MD, Quatrro GlobalServices, said, “The Indian technology industry is renowned globally for itspioneering innovation and the start-ups arena is no different. India is one ofthe fastest growing start-up landscape in the world and every majoraccelerator, investor, angel group, is participating in becoming a part of thisgrowth journey. Today, Indian ecosystem is flooded with innovative ideas andneeds the right channel and guidance in terms of acceleration, scaling up andfunding to continue to disrupt.”
ECOSYSTEM RIPE FOR HEALTHY GROWTHTHROUGH VERTICALIZATION AND INNOVATIVE BUSINESS MODELS
With 40% ofstartups in the B2B segment, B2B’s share in the overall tech start-up fundingis over 30%. Corporates are playing a vital role in supporting these with over50+ collaboration programs, 20+ corporate accelerators (recording a 33% YoYgrowth), and 30-40 active corporate investors, thus increasing their role inthe rise of the start-up ecosystem.
Fin-techstart-up base is estimated to be 360 in 2017 indicating at 31% YoY growth withover $200 mn funding received in H1-2017, recording a growth of 135% sinceH1-2016. Sub-segments like digital payments and lending are maturing, whilewealth management and insur-tech emerging as growth areas. Implementation ofadvanced technology also becoming prominent, with 33% of fintech fundingtowards advanced technologies such as Artificial Intelligence and Analytics.
Witnessing a28% YoY growth in 2017, Health-tech vertical has an estimated total base of 320start-ups. The vertical also garnered a total funding of $160 mn in H1-2017, upby 129% since H1-2016. Areas like health information management,aggregator/ecommerce have continued to mature with growth in areas like anomalydetection, disease monitoring, and tele-health/tele-medicine. As for advancedtechnologies, 31% of health-tech funding went towards Artificial Intelligence,IoT, and Analytics.
With over60% start-ups, the B2C tech start-up segment focused on creating innovativebusiness models and taking the vertical approach, securing close to 70% of theoverall tech start-up funding in H1 2017. Leading vertical in the B2C segmentare travel and hospitality, food-tech, fin-tech, and health-tech.
Speaking onthe occasion, Mr. R Chandrashekhar, President, NASSCOM, said, “The Indianstartup ecosystem is maturing, driven by young, diverse and inclusiveentrepreneurial landscape. This is leading to emergence of focused domainsolutions for verticals like healthcare, agriculture, and education. Findingsof the report is a testimony to the potential of the start-up landscape and thescope of growth and opportunity that India presents. NASSCOM will continue itsdrive towards catalysing deep tech start-ups, build category leaders andsupport start-ups to create for India.”
RISE OF NEW-AGE ADVANCED-TECHSTART-UPS
Growing at5-year CAGR of 30%, advanced tech start-ups focused on creating solutions insegments like Artificial Intelligence, Analytics, Augmented Reality / Virtualreality, Blockchain and Internet of Things, among others. Enterprise andSMB-focused horizontal solutions start-ups, 90% of which is SaaS-based, are alsowitnessing significant inflow of funding.
GROWING FROM STRENGTH-TO-STRENGTH:DRAMATIC RISE IN UNICORN FUNDING AND M&A
Unicornfunding took centerstage with big deals announced in the year. Investors fromnon-US countries expanded their investments in Indian startups. Indian unicornsin the B2C space continue to garner global funds and stir-up the competitivelandscape. With a growth of 167%, the funding of entire Indian start-upecosystem (led by unicorns) amounted to $ 6.4 bn in H1-2017. The averagefunding for B2B tech start-ups in 2017 saw an increase of 5% while B2C techstart-up average funding saw a decline of 10%.
Driven bythe need to enhance tech capabilities, expand markets and portfolio, globalcorporates are now drawn towards the Indian tech start-up arena. H1-2017 saw50+ M&A deals, indicating at a growth of 25% since H1-2016. Over 325start-ups emerging, with YoY growth of 18%, catering to social challenges inthe areas of healthcare and education, and are thus building solutions for India,creating social impact.
BUILDING A ROBUST WAY FORWARD FORGROWTH
Continuingthe ‘By India, For India, Of India’ movement, the Indian tech start-ups willcontinue to innovate enabled by technology and newer business models and willhave a long-lasting impact in improving the quality of start-ups arising fromIndia, in the coming years. NASSCOM with continue to catalyze and support deeptech Startups, and help build category leaders who can create solutions forIndia. The top priorities for thevarious other stakeholders will be as follows:
Forstart-ups: Building products that address need-gaps and challenges, defining afull-bodied go-to-market strategy to scale-up, while building a team in thetechnology, domain, sales, and customer experience.
Forincubators / accelerators: Provide deep mentoring, help start-ups internalizeorganizational best practices, and help establish global connects
Forcorporates: Accelerate start-up partnerships and help identify white spaces forinnovation
ForGovernment: Enable ease of doing business by minimizing regulatory impediments,remove asymmetry in policies, provide access to government projects, and helpsecure early stage funding